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An underinvestment in attracting new talent since the early 2000s, an acceleration in baby boomers exiting the workforce, and the global COVID‑19 pandemic have created the perfect storm for a talent crisis in the insurance industry. The skills shortage is not news to the commercial sector; a disparity has existed between the qualities and knowledge firms are seeking and those skills candidates display for some time. However, for an industry that lives, breathes, and advises on risk, this disparity begs the question whether enough focus is being placed on mitigating the impact of a global talent shortage.
The insurance market is increasingly focused on the key emerging risks for the future, including the impact of climate change, unmodelled perils, cyber risks, inflation and supply chain complexity. In recent years the role of risk management has been elevated, becoming an area of primary focus for companies and their respective boards. However, the investment in attracting and developing the next generation of talent to assess, manage and mitigate risk, has not kept pace with the growing importance of these functions in the commercial world.
It is not difficult to understand how the market got to its current state. In the interests of cost efficiencies, many entry-level insurance roles have been offshored or outsourced over time. The digital transformation of our industry has also left some traditional junior roles obsolete due to automation. Simultaneously, as younger staff have become more mobile and competition between employers has intensified, many companies have scaled back trainee or graduate programs, taking the view that they were training staff for them to be snapped up by competitors.
Structural dislocation and periods of economic recession have culminated in a “do more with less” outcome, whereby the younger generation got left behind, often seen as not being a fruitful enough investment to justify the immediate nurturing required. These challenges have converged with an overarching PR issue faced by the industry – insurance lacks appeal as an exciting career choice, which leads to an inability to secure a steady pipeline of future employees.
The additional challenges presented by events in the last two years have now brought the situation to a head. By no means least is the effect of the COVID‑19 pandemic on the employment landscape. By disrupting the traditional office-based model, the pandemic has forced our industry, along with many others, to get comfortable with the idea of remote or hybrid working. A potential “2020 effect” has emerged – a general feeling that employees have become accustomed to a new balance.
This is a key factor behind the trend among senior employees – realizing they don’t wish to return to the office full time (or indeed at all) – choosing to accelerate their plans to retire. According to Pew Research, 3.2 million more baby boomers retired in the third quarter of 2020 in the U.S. than the same quarter of 2019.1 Many are viewing now as a good time to take a step back in their career, further exacerbating the imbalance of available talent in the industry today.
The restrictions on travel resulting from the pandemic are also having a sizeable impact, particularly on developed economies who have traditionally relied on the international migration of skilled workers and students to fill skills gaps. In the UK, international workers make up one-fifth of employees in financial services.2
The failure for knowledge to be transferred “down the line” within organizations is leading to a talent vacuum that is creating mounting wage pressure. Consequently, poaching is rife. This is exemplified by a recent ManpowerGroup survey that found 69% of U.S. employers and 54% of companies globally are reporting difficulties filling open positions.3
From an underwriting viewpoint, valuable technical and commercial perspective is gained through practical experience in a supported environment. By cannibalizing the existing talent pool without investing in appropriate training and development to ensure a pipeline of skilled workers, the resilience of the industry could ultimately be compromised due to weaker underwriting skills.
Furthermore, a move toward embracing technology via models and AI solutions does not appropriately recognize the role underwriter skill and experience plays in portfolio profitability. Technology, of course, has an essential role to play; however, most industry professionals appreciate the need to strike a balance between the “art” and the “science” of underwriting. Cognitive skills, including judgement and negotiation, are key qualities of high performing talent and ensure that digital platforms and models are built around and fed with credible data.
By way of example, there is currently a great deal of discussion surrounding unmodelled perils, an underrated segment of exposure in the industry requiring strong manual underwriting capabilities and judgement to identify risk. However, such technical and commercial knowledge takes time to cultivate. In many areas of the market, this knowledge and those skills cannot be completely converted into algorithms, due to a lack of valid historical data or rapidly changing conditions.
Evaluating risk is about understanding the technical aspects of underwriting, but knowing how to negotiate commercially with brokers, insureds, or underwriters is equally as important. A strong mentorship and support system involving colleagues who have accrued years of practical knowledge is vital for successfully training the next generation.
Generation Z, or the “dot com kids”, are those born roughly between 1995 and 2009. They represent 32% of the global population. This generation is a rapidly emerging source of talent and will make up 34% of the global workforce by 2030.4 Gen Z is globally connected, technologically minded, and focused on innovation and future sustainability.
Being the first generation born into the tech age, this age group will likely be the most useful source of talent to help the industry battle the changing risk landscape, using the power of technology. The individuals in this cohort, however, will also have very different needs as employees than generations before them, and employers will in turn require different strategies to attract and retain them. Research from Deloitte highlights Gen Z employees as purpose-driven, with a high regard for a strong value proposition in business, and a desire for more personalization in their career path.5
The industry must be strategic about appealing to the unique personal characteristics and career aspirations of Generation Z. This is a great opportunity to attract a large portion of our future talent.
The Australian and New Zealand Institute of Insurance and Finance (ANZIIF), harnessed learnings from research in recent years to develop the “Careers in Insurance” initiative.6 This program aims to utilize appropriate channels to engage with this younger generation and highlight the breadth of opportunities the industry provides for a rewarding career.
Similarly, the London Market Group (LMG) has initiated a movement through the London Insurance Life (LiL) body, focused on attracting the next generation of talent.7 The initiative aims to provide information on careers in insurance through social media and digital marketing strategies, as well as promoting a focus on equal opportunities for young people.
These current initiatives highlight the portability and variety of a career in insurance. However, many initiatives could benefit from a stronger focus on the core industry purposes of “compensation and indemnity”. This appeals to the sense of purpose that Gen Z individuals cite as important for their careers. The industry could also promote the opportunities for this younger cohort to shape future solutions surrounding social justice, DE&I, ESG and climate change.
Traditional graduate programs offer a strong model to harness the potential of young employees eager to develop a firm understanding of the business. However, once the tenure of that program is up, the career trajectory for those individuals is not always clear, often leading to lower retention rates.
One strategy to improve graduate schemes and benefit from the potential of younger generations is to extend the prospects for candidates beyond the program. For example, by offering a 5 to 10‑year post-graduate scheme, younger employees would be able to see the possible ascension of their career.
By its nature, insurance needs to offer a wide scope of products and functions to cater for the evolving risk landscape. This provides huge opportunity for individuals to tailor their career avenues toward personal interests and skills.
The insurance industry has long been as a sector with bountiful opportunity for those willing to engage and participate. Mapping out career progression in the business will allow Gen Z to appreciate the diversity a career in insurance can provide – as well as appreciate the impact they can have in shaping the future of our market.
Emma Matteson
Sr. Underwriting Specialist
