The Calm Before the Storm

Industry survey results show clear skies, but a talent shortage looms on the horizon.

September 24, 2013 Photo
The insurance industry is entering smoother waters as the labor market inches its way back to its pre-recession state. Industry unemployment went down to three percent for the month of July, as reported by the Bureau of Labor Statistics. Most economists believe that full employment happens somewhere around four percent unemployment rate, so the industry appears to be well staffed. This is on par with the figures we used to see back in 2007.

Interestingly, it seems that the rate of hiring has begun to taper off. Perhaps staffing levels are again consistent with where they were prior to the layoffs and hiring freezes of the past. For the first time in the history of the Mid-Year Insurance Labor Outlook Study, conducted by The Jacobson Group and Ward Group, hiring projections are lower than the previous iteration. Of those insurance companies surveyed, 54.4 percent said they intend to hire in the coming year. That number is down two percentage points since January.

While unemployment may be down and hiring may be leveling off, we must not be fooled. The recruiting climate is still as difficult as ever, and insurers may be finding themselves in a bind as the workforce ages and the skills gap takes hold.

Market Confidence Remains

Revenue and staffing projections remained optimistic at the start of the second half of 2013. Revenue expectations also have shown a slight decrease, with 81 percent of companies expecting to grow revenue this year. This is down slightly from 86 percent in January, yet still quite high and optimistic. Back when the survey’s first iteration polled the industry in July 2009, that number was only 56 percent. The primary driver of expected increase was reported as change in market share.

The slight decrease in both hiring and revenue projections from six months ago is reflective of a less volatile market. While there are a significant number of organizations expecting changes, it is not happening as dramatically—in terms of the amount of revenue or staff that they expect to increase or reduce—as in the past. We are seeing an overall smoothing effect in the market.

Temporary employment is becoming an increasingly important percentage of the industry’s labor market. The temporary penetration rate of the greater economy has increased by 4.76 percent in the past year and has increased substantially since 2009. It is expected that use of temporary staff will only increase, especially in the insurance industry as companies look for ways to combat the skills gap. According to the study, 16 percent intend to increase the use of temporary employees, while 77 percent will maintain their usage. Historical data is beginning to present a seasonal trend, with temporary staff usage projections heightening in the summer iteration.

Recruiting Difficulty Continues

Overall, survey respondents indicated that recruiting is moderately difficult and slightly more so than it was a year ago. Product line does have an impact on ease of recruiting. Currently, commercial and specialty lines report the highest levels of difficulty and present the most competitive job market.

In terms of demand, claims positions ranked the fourth most likely to increase, behind technology, sales and marketing, and underwriting positions. This demand is led by commercial lines companies and followed closely by personal lines. Demand for claims has remained relatively consistent over the past four years of study results, decreasing only slightly with overall hiring projections.

The leading reason for 46 percent of respondents to increase their staff was expansion. This is followed by anticipated increase in volume for 43 percent of respondents. Twenty-seven percent of respondents intend to improve service levels, while 23 percent are currently understaffed. Interestingly, 17 percent of companies expect to do some reorganization, which will result in staff increases rather than decreases.  

What It Means for the Employer

High demand and recruiting difficulty certainly are taking effect on the market. BLS data tells us that with a median age of 45 years, the insurance industry relies on tenured professionals. The average tenure in the insurance industry is 5.7 years, compared to the overall economy at 4.6 years. Further, mass exodus of baby boomer employees could happen sooner than expected with Obamacare retirement benefits kicking in. Only 26.67 percent of the insurance industry’s workers are under the age of 35. These factors create an incredibly competitive recruiting environment and a strong need to bring new talent to the industry.

One effect of this competitive environment is that trends in compensation are shifting. Expectations for seasoned employees are going up. Industry-wide, salaries are increasing. This is partially driven by the return of annual bonuses that may have been cut during the recession. 

The return of training programs is another outcome of our current market. There has been an uptick of interest in career development plans and the resurrection of college development programs. As revenue improves, some organizations are moving to put these programs back in place.

The real action item for all industry organizations is to build a strong talent pipeline now. This means bringing new talent to the industry and integrating them for future success. Interns, recent college grads, and those from outside the industry are all viable recruits.

With low unemployment and less volatile market expectations, it may seem like smooth sailing for the industry. However, we must look ahead to the future. The current recruiting climate is difficult, but it only will get worse as we navigate future challenges. To stay one step ahead, build the bench now for succession concerns that will undoubtedly arise later.   



About the Study

The Mid-Year Insurance Labor Outlook Study ran from July 10 through July 26, 2013, and surveyed insurance organizations of all sizes and scope across all sectors. This iteration of the study accounted for about 180,000 industry employees, or about 12 percent of the insurance carrier labor market.

About The Authors
David E. Coons

David E. Coons is senior vice president of The Jacobson Group.

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