Millennials now account for nearly a quarter (24.5%) of Australia's private health insurance market, compared to only 16.3% in 2008, due to an increase of 1.1 million over the period, says Roy Morgan, the market research company, in a new report.
In 2008, millennials share of the market was well below that of pre-boomers, baby boomers and generation X but as a result of their rapid growth, they are now close to being the most significant generation in this market. They contributed 49.6% of growth in the private health insurance market over the past nine years.
The youngest group in this market is generation Z, which has also experienced a major increase of 749,000 customers since 2008 and now accounts for 8.8% of the market. This share is currently not far below the 12.2% held by the oldest generation, the pre-boomers who make up 12.2%.
Mr Norman Morris, Industry Communications Director, Roy Morgan Research, said: “Millennials have been shown to be the major driver of growth as they account for around half of the increase in the market over the last nine years. The motivation for millennials taking out health insurance has some differences compared to other groups, including around one in five (20.7%) saying that they ‘only did it to avoid paying extra tax’, this is twice the average for other generations (10%). They also rely to a much greater extent on recommendation from family and friends when choosing a health insurance provider, nearly one in three do so (30.1% ) compared to only 12% for other groups.
Not all millennials are the same
Although 43.6% of millennials overall now have private health insurance, this varies considerably by income. In terms of personal income, less than a third (32.4%) of millennials with an income of less than A$50,000 (US$39,400) pa have private health insurance but this increases to 71.1% among those with incomes of A$100,000 pa or more.
In terms of millennials household incomes, for those with an income of less than A$60,000 pa, only 23.1% have private health insurance, compared to 73.1% for incomes of A$150,000 pa or more.
Mr Morris said: “With health insurance facing rapidly rising premiums, it is now becoming increasingly important to understand where the growth is coming from and what motivates this growth. This research shows that with the ageing of the population, it will become more important to encourage the younger age groups to become more engaged with private health insurance.
“In terms of brand loyalty, millennials show that they are much less likely to renew automatically with the same insurer as they indicate that they are either more likely to shop around before deciding, don’t know what they will do or intend to change company.
“Although millennials have been seen to be a critical segment to achieve growth in private health insurance, they present a challenge to engage, particularly those on lower incomes and those with major alternative commitments such as home loans and family expenses. They also present a challenge in terms of brand loyalty compared to other generations and are likely to need an incentive to renew with the same provider. Incentives are not the same as discounts and understanding how to engage millennials requires understanding of their motivations and values.”