The insurance industry is enjoying a return to its pre-recession state. Industry unemployment decreased nearly three percent from January 2013, as reported by the Bureau of Labor Statistics (BLS). The current unemployment rate of two percent is the lowest our industry has seen since March 2007. Since economists estimate full employment at around four percent, it is clear the industry’s talent pool, including claims, has reached a point of being very well staffed.
Interestingly, despite the industry’s robust staffing, the rate of hiring also has increased to its highest point in the history of our Semi-Annual U.S. Insurance Labor Outlook Study. Of the companies surveyed, 61.9 percent intend to hire in the coming year. This is 5.8 percent and 7.5 percent higher than reported in January 2013 and July 2013, respectively.
While low unemployment and the push to fill open positions is certainly a positive for the industry, it does bring with it a set of challenges. With companies focused on increased hiring and the industry’s significant decrease in unemployment, the difficult recruiting climate insurance companies are facing will only intensify—and claims will be no exception.
Insurance Market Hits High Point
In addition to optimistic staffing projections, the study showed estimated revenue growth for the beginning of 2014 at a record high. Coming off a slight decrease in the second half of 2013, 87 percent of companies reported that they were expecting to grow revenue this year. This is the highest percentage reported in the history of the survey and marks a 31-percent increase from the survey’s first iteration in July 2009. The primary driver of the expected increase in revenue was reported as a change in market share.
Temporary employment continues to be an important part of the overall labor market. During the past six months, temporary employment within the greater economy has increased by 98,500 jobs. The temporary penetration rate now stands at 2.06 percent, a substantial increase from its low in 2009 and the highest point in the history of the study.
Within the insurance industry, the use of temporary staff is expected to continue—a result of the aging workplace and growing skills gap. Seventy-two percent of companies participating in the survey responded that they were planning to maintain their use of temporary employees, while 15 percent intend to increase their use.
This increase in temporary employees is no longer just indicative of a short-term, seasonal trend, but is an indicator of a long-term shift. As employers look to manage costs and employees search for greater flexibility in the workplace, we can expect a continued increase in the number of temporary employees.
Industry Continues to Face Recruiting Challenges
As the unemployment rate continues to decrease, survey respondents indicate that recruiting continues to be moderately difficult, with select positions becoming slightly more difficult to recruit for than a year ago. With the number of unemployed individuals continuing to decrease, we are already predicting that we will see an increase in recruiting difficulty in the next survey iteration.
While actuarial, analytics, executive, and technology positions continue to be the most difficult positions to fill, the low unemployment rate is driving a challenging recruitment climate for most industry roles, including claims, which has been holding steady at a 4.8 difficulty rating for the past three iterations of the study.
In terms of demand, claims—along with technology, underwriting, and sales/marketing positions—continue to hold the top positions. P&C balanced lines companies are more likely to increase claims staff when compared to P&C commercial and personal lines or life/health companies. The likelihood of companies hiring claims professionals has grown steadily throughout the past four years, increasing from 4.1 in January 2010 to 5.2 in the current study. This can be attributed to a combination of the volume and frequency of major storms and catastrophes in recent years, as well as an aging workforce resulting in a number of retirees. As companies focus on strengthening their catastrophe models, claims will continue to remain a priority.
Large and medium-sized companies are most likely to increase staff in technology and analytics, while smaller companies are focused on recruiting in underwriting and technology. Across all sectors, technology remains the most likely position to be filled in the upcoming year. This is reflective of the industry’s growing focus on technology innovation and trends.
The top reason for increasing staff was reported as an anticipated increase in volume for 55 percent of survey respondents. This is a significant increase from the 43 percent reported in July 2013. In regards to the drivers of this staffing increase, expansion held steady at 48 percent and service level improvement increased to 35 percent.
What this Means for Employers
An aging workforce and reliance on seasoned, tenured professionals has already created a tightening labor market throughout the insurance industry. Nearly 50 percent of the industry’s workforce is above the age of 45, according to the BLS. In addition, an average tenure of 5.7 years versus an overall average of 4.6 years highlights an industry comprised of older and more tenured workers when compared to the rest of the U.S. economy. Add in low unemployment rates and the push to fill in-demand positions, and both the overall industry and claims sector are facing a perfect storm in terms of a talent shortage.
For claims managers and other hiring managers to combat the growing skills gap and ensure the continued success of companies within the industry, focus must shift to engaging and recruiting young professionals and recent college graduates. By building a strong talent pipeline, organizations will be better prepared for the wave of retirees that is expected to occur throughout the next 15 years.
Unfortunately, insurance ranks near the top of the list of least-desirable industries for recent graduates, according to The Wall Street Journal. Companies need to spend time rebuilding their images and educating industry outsiders on the ways their skills and backgrounds can be leveraged within the industry. Key areas of focus include creating a company culture focused on supporting employee development, fostering mentorship, and providing a quick climb up the organizational ladder. Already, national carriers have begun offering more aggressive compensation plans in order to attract talent. In order to remain competitive, small companies and regional carriers will need to follow suit. With revenue projections continuing to climb, now is the perfect time to start implementing these programs and changes.
While things are certainly looking up for the insurance industry with unemployment at a recent low and revenue on the rise, it is important that company executives focus on the future. As employment trends highlight our return to prerecession rates, the growing recruitment challenges will only intensify. In order to successfully combat the impending talent shortage in your claims department, stay one step ahead and begin building your bench of talent by attracting new talent and cultivating the next generation of successful claims professionals today.
About the Study
The Insurance Labor Outlook Study was conducted by The Jacobson Group and Ward Group. Participants were surveyed from Jan. 13, 2014 through Jan. 31, 2014, and it included insurance organizations of all sizes and scopes across all industry sectors. This iteration of the study accounted for about 265,000 industry employees, or about 18 percent of insurance carrier labor. For a full results summary of the study, go to http://jacobsonline.com.