Millennials in their early 20s tend to be riskier drivers than previous generations at the same point in their lives, according to a new TransUnion study.

However, the study also found that as millennials reach their early 30s, they perform as well – if not better – than Gen X drivers of the same age.

“Younger consumers are generally viewed as being the riskiest in the insurance market – oftentimes for good reason,” said Mark McElroy, executive vice president of TransUnion’s insurance business unit. “On a percentage basis, they tend to get into more accidents and receive a higher propensity of vehicle citations. Our study data clearly proves this, but we also derived new findings that paint a better picture of them. As millennials grow older, many consumers in this generation become good risks for insurance carriers, who can benefit from long-lasting relationships with this influential group.”

Millennials represent approximately 80 million consumers, which is about 25 percent of the population and nearly double that of Gen X, according to the U.S. Census Bureau. That makes them the largest generational market for insurers.

Winning their loyalty, though, might not be so easy.

According to the study, millennials tend to be less loyal to existing insurance carriers. Over the last five years, the average number of auto insurance quotes a millennial shopper obtains per year – 2.25 quotes – has been higher than the overall population average.

TransUnion’s study also found retention rates in this same timeframe show that millennials remain with carriers far less often than prior generations. Their retention rates are seven percentage points lower than Gen X and 16 percentage points lower than baby boomers.

“The more we examine the driving and insurance shopping behavior of millennials, it becomes apparent that the engagement model must change for insurers to attract millennials and write them profitably,” said Jeff Reynolds, vice president for product development of TransUnion’s insurance business unit. “That said, carriers will have to adjust process and metrics appropriately to better meet their needs. For insurers looking to better engage with millennials, comprehensive underwriting and alternative pricing and products that target millennials’ specific needs will be more important than in the past.”

The Most Distracted Generation

TransUnion’s study found that there might be good reason for some carriers not to offer policies to millennials, especially those who cannot identify and price the risk appropriately. The study examined TransUnion’s proprietary driving-history records, distracted-driving information and vehicle-history information that found:

• The frequency of violations is highest for millennials and has been increasing over time.
• Millennials receive the most distracted-driving violations of any generation, and the rate of increase is 1.8 times higher than Gen X and 2.4 times higher than boomers.
• Millennials average more driving miles than any other generation (13,725 miles annually), which is 3 percent higher than Gen X and 8 percent higher than boomers.
• Millennials have the highest percentage of higher-risk vehicles.
• Millennials have the highest percentage of only having liability coverage (37 percent).

“I don’t think you will ever see a time when the youngest consumer group poses a lesser risk than older ones, but our study clearly shows that despite the risk, it’s in an insurer’s best interests to develop relationships with them – even at the beginning of their insurance journey,” concluded McElroy.