The long predicted war for talent is here. Despite years of warnings and pages of research, the recent period of relative stability—and a return to the market’s pre-recession state—has created a false sense of security. As a result, the insurance industry remains unprepared to face the increasingly challenging labor market.
One key labor market issue is the industry’s virtually non-existent unemployment. According to the Bureau of Labor Statistics (BLS), the unemployment rate within the insurance industry is at three percent for February 2016. With predictions for 2016 pointing to an average rate hovering between one and three percent, it is clear that the industry has rebounded to full employment. While this is certainly a positive statistic, it also indicates an increasingly shallow talent pool from which insurers are able to find and recruit talent.
As the industry’s talent supply continues to decrease, the demand for additional staff is growing at a breakneck pace. According to the “Semi-Annual U.S. Insurance Labor Outlook Study,” which is conducted by The Jacobson Group and Ward Group, the estimated rate of hiring within the industry has reached an all-time high of 66 percent. This represents an increased focus on hiring beyond the usual filling of positions due to natural attrition.
Compounding the growing recruitment challenges is the reality that insurance, as an industry, is more aged and more tenured than its counterparts in the overall economy. As a result, insurers face a pending mass exodus of experienced professionals and a widening skills gap. In addition, insurance organizations continue to face immense challenges in attracting and engaging young professionals and recent graduates to a career within insurance. We undoubtedly are amidst one of the most competitive recruiting environments the industry has ever faced, and no sector will be spared—not even claims.
It is clear that the need for an industry talent solution is pressing and immediate. Now is the time for insurers to take action.
Staffing Predictions Hit Record High
Despite years of staffing growth, the demand for industry talent continues to reach a fever pitch. Predicting increases in business volume and market expansion, organizations are looking to exponentially grow their current bench of talented professionals. Reported staffing growth expectations are the highest in the history of the survey and nearly double the 35 percent reported in July 2009, which was measured in the midst of the economic downturn.
As the industry returns to its pre-recession state, staffing has reached historic levels. Currently, there are 1.52 million individuals employed within the insurance industry, representing a growth of more than 97,000 new positions since the industry low in April 2011. The industry has not seen this many professionals employed since December 2003.
Despite the increase in employed professionals, the number of job openings within the insurance industry continues to rise. In 2015, insurers saw an average of 251,000 job openings—an increase of 20,000 open positions compared to the average reported in 2014. This is more than double the 120,000 job openings reported in 2009. It is clear that new jobs are being created far beyond what the industry’s increasingly shallow labor pool is able to supply.
Temporary Solutions
Despite industry-wide predictions of a drop-off in interim staffing use among insurance organizations following the economic recovery, temporary employment continues to play a pivotal role in the job market. In January 2015, the temporary penetration rate for the overall labor market—the number of temporary jobs as a percent of total employment—reached 2.04 percent. Despite a slight drop from the 2.06 percent reported in December 2015, this rate highlights the continued strong presence of temporary employees within the workforce. Within the last six months alone, temporary employment within the greater U.S. economy has increased by almost 44,000 jobs. Today, there are more than 2.9 million interim professionals active within the labor market.
Taking a look specifically at the insurance industry, there are an estimated 30,000 contract workers currently employed. Currently, 88 percent of organizations participating in the survey responded that they are planning to maintain their use of temporary employees—the highest rate in survey history. As the industry comes face to face with a growing skills gap, aging workforce, and a wave of retirements, this number will only increase.
For claims organizations, high-cost catastrophes and their resulting widespread damage often have led the call for interim professionals. Unfortunately for claims organizations, the recent lull in high-cost, high-damage events and the resulting shift away from temporary professionals has led many claims contractors to turn toward full-time employment. As a result, these individuals no longer are available to join organizations on a temporary basis in their times of need. If the upcoming year sees an increase in natural and man-made disasters, claims organizations will find it difficult to bring temporary claims staff on board.
Talent Recruitment
Bucking the trend of recent years, surveyed organizations indicated a slight lessening in terms of recruitment difficulty for the majority of industry functions. In fact, nine out of 12 roles surveyed for—including claims—saw recruiting difficulty decrease slightly over the past year. Despite this drop, successful recruitment for eight out of 12 roles continues to be moderate-to-difficult. Actuarial, technology, and analytics again top the list of difficult areas to fill.
Claims difficulty, which historically has hovered around a five rating, came in at 4.8—a drop of 0.1 and 0.3 over July 2015’s and January 2015’s survey results, respectively. Despite its moderate ranking, a lack of incumbent claims talent joining the sector is expected to make it more and more difficult to find high-quality claims professionals moving forward.
In terms of current market demand, technology, claims, and underwriting once again round out the list of top three functions for which companies are most likely to increase staff. Property and casualty balanced lines organizations are anticipating the greatest increase in claims staff when compared to commercial and personal lines organizations.
While claims recruitment difficulty has decreased slightly in the past six months, it is anticipated that this reprieve will not continue. Thanks to competitive compensations and successful engagement efforts, many active claims professionals are content with their current jobs. In addition, the claims sector is comprised largely of tenured, mature employees who are not looking to change positions and, instead, plan to remain in their posts until retirement. As a result, we are seeing a static market. Thanks to an entrenched workforce uninterested in shifting organizations or roles, insurers are poised to face a lack of potential claims talent available to meet future demands.
Strategies for the Future
Much like the overall insurance industry, claims organizations face a talent crunch as their tenured professionals mature and prepare for retirement. The past 10 years have seen the number of insurance professionals aged 55 and older increase by 74 percent. As a result, 20 percent of the industry’s workforce is now approaching retirement—a number that is expected to reach 25 percent by the year 2018, according to a McKinsey and Co. report entitled, “Building a Talent Magnet: How the Property and Casualty Industry Can Solve Its People Needs.”
While the median age for claims employees is 43 years old—slightly younger than the overall insurance industry median age of 45—many claims organizations have not focused on backfilling a bench of emerging talent against their currently aging population. As a result, claims organizations are expected to face a drastic talent shortage in the near future. Already, the industry’s high demand, static market, and shallow talent pool have slowed down the hiring process. Today’s roles are taking more and more time to fill and the number of job openings only continues to grow.
In response to this challenging labor market, insurers must shift their focus toward recruiting the next generation of claims talent. Fortunately, millennials are poised to help fill the gap. Officially the largest generation in today’s labor force, millennials account for 25 percent of the U.S. workforce—a number that is expected to reach 40 percent by the year 2020, according to a report from PriceWaterhouseCoopers report entitled, “Millennials at Work: Reshaping the Workplace.” With one million millennials entering the U.S. workforce on an annual basis, this generation offers a timely solution to the needed influx of talent within claims.
However, according to some statistics, graduates from risk and insurance programs are meeting only 10-15 percent of the industry’s need, which means claims organizations must look into innovative recruitment strategies in order to find success. A “one size fits all” recruitment approach isn’t going to work; we must rethink how we compete for talent much in the same way that we innovate constantly to attract new customers.
Out-of-industry talent recruitment offers claims organizations an opportunity to expand their recruitment efforts beyond internal talent. It enables them to reach non-insurance candidates who have the skills and backgrounds necessary to succeed. Focus should shift away from candidates with a background within the industry toward finding the right qualities, characteristics, and traits of a successful claims professional regardless of their professional experience. Often, these individuals have a number of transferable skills that can be translated easily into a claims role—including good communication, customer service orientation, technical capabilities, and personal motivation.
Insurance organizations also should consider engaging their current millennial employees in the recruitment process—from providing referrals to including them in both on- and off-campus recruitment efforts. Having recent graduates share their experiences and provide endorsements lends credibility to the industry as a career choice and combats negative perceptions among potential candidates. In addition, real-world testaments from young employees provide invaluable outreach to the next generation. Today’s millennial professionals place a large amount of emphasis on the opinions and experiences of those in their networks. Insurers looking to capitalize on this emerging generation of talented individuals should embrace the power of word-of-mouth and engage their current millennials to join recruitment efforts.
As organizations continue to grow their staffs, the industry must rethink its current staffing and recruitment strategies. No longer can insurers passively search for talent and expect to meet their growing demands. Rather, claims organizations—and the greater insurance industry—must be strategic and innovative in their practices and focus on building a bench of talented young professionals to support their needs. The time is now for organizations to actively work on building a successful future, lest they find themselves unable to weather the growing talent storm.