Insurance Gets Hip

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Prior to the nightmare of Sept. 11, the insurance industry seemed like a conspicuous province of the boom days of the 1950s. With GI Bill-educated warriors entering the white-collar world, and their families cashing in war bonds and sprawling into subdivisions, the country brimmed with new money, new earning power and a new sense of household propriety. And the insurance business boomed as well, selling peace of mind and security.

Insurance was something few ever expected to see advertised to the viewers of MTV.

Yet, if you tuned in recently to the erstwhile music network, or ESPN or Comedy Central, you might have seen the stylish, fisheye spots for State Farm, the Bloomington, Ill.-based insurance giant, which had $78 billion in total assets in 2000. “Like a good neighbor,� State Farm agents have stripped down to their shirt sleeves to hang with twentysomethings, skateboarding with them, scratching at the rave, browsing at the fashion-victim salon. On the Web, cruise into a young adult targeted Web site, say,, and you may behold a giant pop-up ad that presents a streaming progression of trendy young people, under the copy, “No matter who you are or what you drive … there is a State Farm agent for you.� The Gen X reps — overly made-up, vinyl-adorned poseur, the guy in dreads, the white punker also in dreads — appear in tandem with an automobile that matches their own offbeat look.

In terms of iconography, this is not the intrepid insurance person of the myriad home and casualty ads of the past 20 years, showing up after the horrible storm, or the quirky, comedic pitch for the lowest auto insurance rates in the business. In an industry that has long put on a somber, hyper-honest face, State Farm may be the first company to try to put on that sardonic grin that seems the province of Gen X.

“We do life solutions, and we do that by following life stages,� says Melinda Mueller, marketing manager at State Farm. “A first car. Graduating from college. Getting your first job. Getting married. You start buying life insurance when you have a baby. Most renters happen to be in this younger group, but only 3 in 10 have renters insurance. Statistics show that people are getting credit cards and managing their finances younger and younger. But as we analyzed our portfolio business, and compared our market share and market penetration in this group, we saw a great opportunity.�

It's the old business chestnut, via baseball metaphor, of “hitting 'em where they ain't.� And as insurance goes, Gen X is a relative void, simply because it's entering such stages for the first time, and later in life than previous generations. According to U.S. Census Bureau data, today's young adults are getting married later: the median age for men rose to 27 from 22 a generation ago, and to 24 from 20 for women. This behavior pattern is likely the result of the 40 percent divorce rate of the 1970s in which they grew up. Coming of age in the era of downsizings, they consider jobs less careers than the means to cover this year's rent: the median stay at jobs by workers in their early 20s has been halved since 1983, from 2.2 years then, to 1.1 today, according to the Bureau of Labor Statistics. Although skewed by their time in the work force, Gen Xers' average investments in savings accounts, IRAs, mutual funds and stocks all stood at around half the amounts of Baby Boomers', according to a 1998 report, “Generation X — A Market in Its Prime,� by life insurance industry association LIMRA International.

At worst, this does not indicate a market with the inclination or wherewithal to invest in financial support services. In the related life category, as of 1998, according to LIMRA, 55 percent of those age 25 to 34 were protected by some type of life insurance, but individual life insurance owned by 25- to 34-year-olds had dropped a precipitous 9 percentage points since 1992.

Still, Gen Xers have shown more of a propensity to save what they do make for the future than Boomers. According to a 1999 survey by the Employee Benefit Research Institute, 68 percent of Gen Xers had begun saving for retirement, an impressive rate, compared with younger Baby Boomers (68 percent) and older Boomers (77 percent), and a higher rate than earlier generations, according to LIMRA.

At the same time, a cabal of interested parties have done much to flip this general have-not-but-forward-thinking status for ulterior purposes. For all the hay George W. Bush made last year about re-channeling Social Security dollars into private investment portfolios, such privatization has been the decade-long mantra of PR praetorians masquerading as Gen X advocates. Largely underwritten by financial service giants, these fronts beat an incessant drum of Gen X's festering disgruntlement over the “Ponzi scheme� of Social Security, to call for the scrapping of current fiscal safety nets in favor of a private investment sluice.

If true, this could well indicate a young adult market that would be friendly to a broader bourgeois phalanx of financial services, from investment brokerage to insurance — but it's a big “if.�

As University of Minnesota political science professor Lawrence Jacobs pointed out in a comprehensive 1998 analysis of this “Gen X lobby,� its slanted questions — say, the verity of UFOs versus the longevity of Social Security — don't hold up to more comprehensive research. Looking across six polls in the mid-1990s, Jacobs found that “large majorities of between 58 percent and 71 percent opposed balancing the budget if it meant cuts in Social Security … Despite breathless media accounts of intergenerational warfare, the younger cohorts were as defensive of Social Security spending (if not more so) as the oldest in 1993, 1995 and 1996.�

Still, the media onslaught by the Gen X lobby played its role as self-fulfilling prophecy. State Farm's own research may indicate as much. “What we've gotten out of focus groups is that [Gen X] feels a sense of ownership, that they should manage and drive their future and wealth and retirement,� State Farm's Mueller says. “They're not leaving it up to the government. It's not that they're necessarily scared about the future of Social Security — they've just sort of accepted that it might not be there for them. It's up to them to do the saving and the investing and the preparing, and that's really where we can help them.�

Whether such potential clients seek some kind of proxy security to fill voids of broken homes or take their safety net into their own hands, State Farm is wisely gambling on Gen X. Notably, the company has used its media to focus on its auto insurance, a category that any car owner must enter at an early age. Its strategy is to then use that car as a beachhead: once the relationship is established, the “good neighbor� agent has the opportunity to establish that all-important trust in a market segment to which trust is dear. As the young shop manager, whose outfit coordinates with her retail environs, attests simply to the viewer of the State Farm spot, “My State Farm agent showed me all about insurance.�

“Insurance can be a complex process,� says Karen Noel, advertising manager at State Farm. “But our message is, ‘There's somebody here to help you whatever life stage you're at, and we can help you all the way through.’�

The 1998 LIMRA report, in fact, found that 41 percent of Gen Xers said they were “likely to buy life insurance in the next two years,� compared with just 23 percent of Baby Boomers. More than 40 percent felt underinsured. The big problem, the report stated, was that young adults did not feel insurance sellers valued their business enough to approach them with any real understanding of their needs.

“So many companies are focusing on the ‘affluent markets’ that they forget this is the emerging affluent market,� says Maria Dynia, assistant scientist in technology research at LIMRA, and author of the 1998 report. “This market does see the need for insurance, but I don't think they're being told they're in a great position to buy life insurance and a lot more, that insurance agents can sell them mutual funds, for example. There's a big cross-selling opportunity here for companies that can figure out how to talk to them in their language, with the kind of multichannel approach that can reach them.�

Three years after Dynia's initial report, State Farm's offbeat entreaty may have filled her prescription to a T, at least in making its introductions to a wide range of prospects. And these abruptly perilous times surely have many young people thinking about security well beyond their cars.

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