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What might Gen Alpha want from car insurance?

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Generation Alpha is the name of the generation of people born between 2010 and 2024. It's the first generation to be born entirely within the 21st century.

Currently, they're still kids, but soon they'll need insurance for their homes and vehicles. Some could be driving as soon as 2027, and by 2030, they're projected to make up 11% of the workforce.

Like any other generation, Gen Alpha already has its own individual character, expectations and desires.

According to Mark McCrindle, the researcher who named this generation, Gen Alpha will be "the most formally educated generation ever, the most technology-supplied generation ever, and globally, the wealthiest generation ever."

In this article, I speculate on what Gen Alpha might expect from car insurance, and how the industry could adapt.

Born between the mid-90s and early 2010s, Generation Z has almost reached adulthood. Now, Gen Alpha is catching up.

We don't know for sure what they'll want from their car insurance. But I predict that they could have 4 key expectations:

1. They'll want a seamless digital experience

Gen Alpha are digital natives who have grown up with touchscreens, smart technology, and artificial intelligence.

According to Statista, 86% of 8- to 11-year-olds had a smartphone in 2019. They’re used to having a world of information at their fingertips. We can expect Gen Alpha to place a high value on seamless digital experiences on mobile.

Statista’s data shows that, while 40% of under 17s use Facebook, 89% regularly use YouTube. This makes YouTube by far the most popular channel for digital entertainment.

In order to effectively reach Gen Alpha, insurers should use channels, like YouTube, to educate their customers.

2. They’ll be willing to share their data (if it benefits them)

Gen Alpha is still too young to say how they feel about data sharing, but we can look to Gen Z for an indication. A study by Adobe found that Gen Z is more willing to share their data than previous generations. 69% of Gen Z respondents said they were happy to share their data in exchange for a better experience with a brand.

But the benefits have to be compelling for Gen Z to share their data. Younger generations are more likely to configure their privacy preferences than older generations or ask social media sites to remove their data.

Gen Alpha, as young as they are, is much more accustomed to sharing data. They've grown up surrounded by brands and social media companies who use that data. They probably have a very rich data profile out there already.

As long as there's a clear benefit, Gen Alpha is likely to be comfortable sharing their data with insurers. They might be more interested in data-led policies that can reduce their premiums, such as smart vehicle telematics.

3. They may look for more flexible products

The Washington Post found that owning a personal vehicle may be less important to Gen Alpha. In the 90s, almost 90% of 20- to 25-year-olds had licences, but in 2020 it dropped to 80%.

There are a few reasons why this might be. For one, Gen Alpha has less of an expectation of conventional ownership. They stream music and film through platforms like Spotify and Netflix (rather than buying CDs or DVDs). They can rent bikes and scooters through initiatives like Lime, CityBike, and Voi. And they often rely on rideshare apps like Uber to get them around.

This pay-as-you-go model—based on usage, not ownership—could be something we see more of with cars too. Gen Alpha may decide to use different means of acquiring a vehicle, such as car clubs, where drivers can use a car only when they need it. 

Car subscriptions are also becoming popular. This is where the customer can pay for a car (with insurance included) and can cancel with a very short notice period. This could be a better product for a flexible consumer. 

Gen Alpha may need to drive less than previous generations. According to Forbes, as of 2023, 28.2% of full-time employees work on a hybrid model, and 12.7% work from home full-time.

If this trend continues, Gen Alpha may find it harder to justify the cost of a vehicle, especially as the cost of driving is increasing. The rise of expensive electric vehicles has pushed up the cost of cars overall, while car insurance has skyrocketed by 58% in the last 12 months.

It’s not just financial costs that might deter Gen Alpha from driving. The Washington Post found that younger generations are more likely to talk about the need for action against the environmental cost of cars.

So, what will Gen Alpha want instead?

One strong possibility is that they could be attracted by flexible insurance products - for instance, pay-by-mile policies or other usage-based products. Instead of committing to an annual cost, they may choose to be covered on a much more flexible basis, depending on the distance they actually drive.

4. They'll shop around for a cheaper, higher-quality, or easier experience

Gen Alpha is likely to be less loyal than previous generations. Decreasing brand loyalty is a trend we've seen successively in Millennials and Gen Z, and we can expect Gen Alpha to follow in their footsteps.

According to research by McKinsey, only 30% of Gen Z would "revert to their 'go to' brand for a new product or service" - instead, they would look for the best price and user experience. 62% of respondents said they'd check out other options, and 50% said they would change brands if an alternative was cheaper or higher quality.

This research suggests that Gen Z feels less of an emotional connection to brands - and it's something we're likely to see in Gen Alpha, too. If so, it means that this generation could have fewer qualms about switching insurance providers, especially if an alternative offers them an improved experience or better price.

While price is often the primary motivator, a smooth digital experience is likely to be non-negotiable for Gen Alpha consumers.

They'll have grown up accessing services instantly through digital tools. And it could be that they'll be less tolerant of the manual data entry or phone calls that some insurers require.

These expectations will impact car insurance in 3 main ways.

1. Flexible insurance policies are likely to grow in popularity

Gen Alpha is likely to value flexibility. Traditional insurance car models have 12-month terms, with fees for cancelling early. The expectations of Gen Alpha are likely to trigger a shift in the insurance market towards more flexible offerings. 

We can already see this shift happening. According to a study by Ptolemus, there are 1.3 million usage-based insurance (UBI) policies in the UK, making it the second-largest market in Europe. Currently, 25 insurers offer UBI policies—including specialist flexible insurers like Marmalade and By Miles—with pay-as-you-drive (PAYD) policies being the most popular.

These policies make up an 11% market share of insurance products, but as Gen Alpha starts to drive, we could see this market share increase.

2. Data-informed coverage may become mainstream

Another type of policy that’s likely to become more popular is telematics. Research has shown how younger generations are willing to share data if it means there’s a benefit for them. Telematics can offer lower premiums in exchange for that data.   

But, Gen Alpha’s telematics policies won’t be the same as the “black box” style policies of today. These currently make up only 6% of the market.

Instead, the telematics of the future uses connected cars, which have data-collecting capabilities built into their onboard computers. Gen Alpha is growing up in a world where their parents may already be driving connected cars, so they could be familiar with them. 

3. Embedded insurance could become more popular

In their search for convenience and flexibility, we could see Gen Alpha drivers less likely to shop around for traditional insurance plans. As a generation who will value smooth and pain-free purchasing, embedded insurance could become more popular. 

For example, Tesla is already offering insurance included with their cars at the point of sale, and other manufacturers are quickly following suit. 

Deloitte argues that embedded insurance is primed to seriously disrupt the traditional car insurance market in the next few years. So the ease of embedded insurance might appeal to Gen Alpha.

There's no doubt that Gen Alpha could cause some disruption in the insurance industry. So, what can insurers do to prepare?

1. Insurers will need to change the way they acquire customers

The way that Gen Alpha makes purchases and engages with brands will be different to other generations. 

Gen Alpha are digital natives, growing up with iPads, YouTube, and streaming platforms at their fingertips. They’re less likely to be watching traditional TV, and they could be hard to reach through conventional advertising. Insurers need to meet them where they are, in the way that they want to be engaged, throughout the whole customer journey.

Something that needs to change is the way insurers market to consumers. 

Rather than advertising based on brands, insurers could have more success by leveraging social media influencers. Research from Digital Voices suggests that 49% of Gen Alpha currently trust influencers as much as their friends and family. Although this may change as they grow up, it does suggest influencers have an important role to play.

Similarly, insurers could lean into video. For instance, educational videos could demonstrate the benefits of particular insurance policies or how to perform tasks such as making a claim.

2. Insurers should make digital a priority throughout the customer journey

Gen Alpha will likely expect seamless digital interactions. To attract and retain these consumers, insurers need to satisfy that demand.

Of course, many insurers are already fully digital entities. However, they could lean further into new technology, such as artificial intelligence (AI), to improve the customer experience even further. 

It’s something that insurers such as Lemonade are doing already. Their whole customer journey is digital, with AI chatbots that prepare bespoke policies and calculate quotes for customers almost instantly. When customers come to make a claim, AI automates that process too. Taking data from customers and their policies, Lemonade is able to process claims in a matter of seconds.

As AI tech becomes more accessible to insurers, more providers could use it to enhance their customer experience. It could reduce form-filling, streamline payouts, and improve the entire customer experience.

3. Insurers could share data more openly

Insurers don't always share data with competitors. There are fair reasons for this. They may not trust the quality of their competitors' data and they don't want to give away a competitive advantage.

But brand loyalty is expected to be lower in Gen Alpha, and they're more likely to switch and swap insurers. As such, it's important for insurers to make sure they're one of the insurers that's being swapped to.

One way for insurers to do this is to become more willing to share data with each other, using open banking. It could bring substantial benefits for both consumers and insurers. With greater access to customer data, insurers could offer customers more personalised policies, while providing quicker quotes and reducing the need for tedious form-filling.

Yet insurers could be even more experimental still. For example, using deeper consumer data, AI bots could even find and apply for insurance policies on customers' behalf.

For a generation that's obsessed with convenience and a seamless customer experience, data sharing plays an increasingly important role in insurance.

With demands for greater flexibility, improved customer experience, and a focus on digital engagement, Gen Alpha raises questions for price comparison websites (PCWs) too.

At Confused.com, we're always working to make customers' experiences as smooth as possible. For example, we're reducing form-filling throughout the customer journey by increasing the amount of data that can be auto-populated.

And we're getting customers to insurance quotes with as few obstacles as possible, with tools such as our quick quote feature. This allows us to provide existing customers with a quote for insurance in a matter of seconds. If a customer already has a quote for car insurance, we can then use the data we have on them to provide an estimate on their home insurance. They won't need to re-enter their details at all.

We're also putting emphasis on our Confused.com app. Gen Alpha could eventually expect easy access to quotes and other useful features via our app. These include a centralised record of their insurance and tax details, fuel price comparisons, and perks and rewards.

We ensure that we offer as many different types of products as possible - including usage-based policies - by including a wide range of insurers on our panel.

The first Gen Alphas will start driving in 2027. They're digital natives who are accustomed to data sharing and ready for a simpler, more flexible insurance experience.

As such, insurers ought to think about how they'll acquire, engage with, and retain these customers. And the time to start preparing is now.

To stay in the loop about how the industry is adapting to the next generation, learn more about what we do at Confused.com.

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