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Sunny Skies Ahead

Insurance industry market stabilization means positive outlook, despite looming talent crisis.

April 13, 2015 Photo

Insurance organizations are enjoying a period of relative stability as staffing and revenue forecasts continue their positive trend following the industry’s return to its prerecession state. Unemployment continues to remain at a low point, with the Bureau of Labor Statistics (BLS) reporting insurance unemployment at 2.3 percent in January 2015. With the average rate for 2014 reaching 3.1 percent, it is expected that the unemployment rate will continue to hover between two and three percent throughout 2015.

Additionally, the estimated rate of hiring within the insurance industry reached an all-time high of 66 percent, according to the January 2015 update to the U.S. Insurance Labor Outlook Study, which is conducted semi-annually by The Jacobson Group and Ward Group. Coming off of a slight decrease to 58 percent in the survey’s midyear iteration, this growth highlights an increasingly positive outlook within the industry. Further, revenue predictions remain positive, despite a slight decrease from the midyear survey. With 84 percent of companies reporting expected revenue growth, this is the fourth-highest rate since the survey began in 2009.

However, the optimistic predictions and relative stability of the labor market are just a portion of the story, as the industry, including claims, is facing challenges brought on by an increasingly tight talent market. As job growth continues to pick up and the labor market continues to face a lack of incumbent talent, the already difficult recruiting atmosphere within the insurance industry is expected to reach a fever pitch.

Staffing Predictions Reach Record High

Despite a small drop in estimated staffing predictions for the second half of 2014, the first-quarter iteration of the Labor Outlook Study saw a record high at 66 percent. This is an increase over the first- and third-quarter predictions from 2014 of four and eight percent, respectively. In addition, when looking forward, the anticipated growth rate of 66 percent is significantly higher than the anticipated growth rate of 35 percent reported in July 2009, in the midst of the economic downturn.

As the industry has recovered, insurance staffing has skyrocketed. Currently, there are 1.48 million individuals employed within the insurance industry, representing a growth of more than 60,000 new positions since the industry low in April 2011. The industry has not seen this many professionals employed since July 2004.

In addition, the number of job openings in the industry continues to rise. In 2014, the insurance industry saw an average of 236,000 job openings, an increase of 23,000 open positions compared to the average for 2013. This is nearly double the 120,000 average openings reported in 2009.

Temporary Staffing Trends

Despite predictions of a drop-off in interim staffing, temporary employment continues to be a vital part of the overall job market. In January 2015, the temporary penetration rate—the number of temporary jobs as a percent of total employment—reached 2.03 percent. While this is a slight decrease from the 2.04 percent reported in July 2014, it marks a considerable growth from the 1.34 percent reported in July 2009. Within the past six months, temporary employment within the greater economy has increased by 94,600 jobs.

It is estimated that there are 30,000 contract workers currently employed in the insurance industry. This number is expected to grow as the industry faces a skills gap, an aging workforce, and an exodus of retiring professionals. Seventy-seven percent of companies participating in the survey responded that they are planning to maintain their use of temporary employees, the same as reported in the July 2014 survey.

Reflective of the continued focus on interim staffing, the number of companies planning to increase their use of temporary staff grew from eight percent to 10 percent. This is indicative of the industry’s desire to maintain its current lean staffing models while still undertaking new projects and expanding business. Often, these organizations turn to interim staff to fulfill their talent needs.

Within the claims sector, the drop in high-cost catastrophes and the resulting decrease in widespread damage to commercial and personal property in 2014 resulted in a decline in the number of temporary professionals being brought on. In turn, many claims contractors have turned to full-time employment and are no longer available to join organizations on a temporary basis. This lack of available temporary talent also has affected the current temporary outlook as it becomes more and more difficult to find contract claims professionals. If the coming year sees an increase in disasters, many claims organizations could have a hard time finding temporary claims professionals to bring on board.

Talent Recruitment Challenges

With the unemployment rate for insurance holding steady between two and three percent, survey respondents indicated that recruiting continues to be at least moderately difficult across most functions. In fact, in 10 out of the 12 roles surveyed—including claims—it was reported to be moderately difficult or difficult to successfully recruit personnel. Actuarial, technology, and executive positions continue to top the list of positions that are difficult to fill.

Claims increased to a 5.2 difficulty rating after reaching 5.0 in the midyear iteration. Previously, claims held steady at 4.8 for the past three iterations of the survey. A lack of incumbent talent joining the claims sector is making it more and more difficult to find skilled claims professionals.

Organizations also are finding that a growing number of claims professionals are uninterested in seeking alternative options to their current situation. Many individuals already active in claims are happy with their current jobs and are well respected and well compensated, which is translating into a static market. In addition, the claims sector is largely comprised of tenured, mature employees who are not looking to change positions and, instead, plan to remain in their posts until retirement. The increased automation within the sector has bolstered the staying power of these professionals, as they are now able to work remotely in lieu of retirement to fit their changing lifestyle needs. Faced with an entrenched workforce that is not interested in shifting roles or organizations, insurers are finding a growing lack of potential claims talent to meet the current demand.

In terms of market demand, claims, technology, and underwriting hold the top three positions. Smaller organizations are more likely to increase staff in claims compared to technology for large companies and underwriting for medium-sized organizations. Property and casualty personal lines companies continue to report the highest likelihood of increasing claims staff when compared to commercial and balanced lines or life and health companies. During the course of the past 12 surveys, the demand for claims has grown steadily from a rate of 4.1 in July 2009 to 5.4 in January 2015.

What Does the Future Hold?

The insurance industry is experiencing an increasingly competitive labor market resulting from the continually aging workforce and the growth in the number of tenured professionals planning to retire. Unfortunately, claims will not be spared. The past 10 years have seen the number of insurance professionals aged 55 and older increase by 74 percent. In addition, 20 percent of the industry’s workforce is approaching retirement—a number that is expected to reach 25 percent by the year 2018.

Fortunately for claims, the median age for employees is 43 years old—slightly younger than the overall insurance industry median age of 45. However, many claims organizations have not focused on backfilling against their currently aging population and are expected to face a drastic talent shortage in the coming years.

Insurers already have seen the combination of substantial demand and limited talent supply slow down the hiring process. Roles are taking more and more time to fill, and the number of job openings continues to rise. Midsize companies especially are struggling to fill open positions, as they lack the resources of larger insurers but have an increased demand compared to their smaller counterparts.

Claims managers and other industry executives now must shift their focus toward building an effective talent pipeline in order to ensure their future success. Fortunately, millennials offer insurers the opportunity not only to prepare themselves for the impending wave of retiring professionals, but also to bring fresh talent into the industry. Millennials currently account for 25 percent of the U.S. workforce and are expected to form 50 percent of the global workforce by 2020. This talented, innovative, and emerging generation offers a timely solution to the talent flux needed throughout the insurance industry.

Claims organizations, however, may find that most millennials looking to enter the insurance industry currently are focused on underwriting and risk management paths—often overlooking claims as a career option. Outside of claims professionals within the auto, health, and homeowners segment, many young professionals do not realize the extensive number of career opportunities and paths that are available within claims. They are unaware of the claims roles that span across professional liability, workers’ compensation, commercial, and specialty lines. In order to move emerging talent into the claims area and prepare for the impending talent drain, work needs to be done to expand the awareness of claims as a professional option.

Claims organizations also may want to turn to talent from outside of the industry to fulfill their needs. Focus should be placed on the skills necessary to be successful in a claims role—including good communication, customer service orientation, technical capabilities, and personal motivation—versus a background within the industry. The search should be expanded to encompass a wider range of degrees and even include highly skilled individuals without a traditional four-year degree. Look to transferable skill sets as qualifications. Some of the best claims professionals previously have worked as CSRs outside of the insurance industry. These individuals have the traits and characteristics necessary for success in a claims role and are a great resource for organizations looking to build their bench of claims talent.

With the insurance industry stabilized and predicting positive growth for both revenue and staffing, the time is now for organizations to look toward building a successful future. We are continuing to see increased recruiting difficulty across all industry disciplines and sectors. The key is to stay one step ahead and build a bench of talented young professionals. If claims organizations—and the insurance industry in general—want to successfully weather the growing talent storm, preparation must begin now.  

About The Authors
David E. Coons

David E. Coons is senior vice president of The Jacobson Group.  dcoons@jacobsononline.com

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