September 8, 2020

4 Talent Management Challenges The Insurance Industry Is Facing

The insurance industry was already undergoing major changes before the COVID-19 pandemic. Digital transformations, the emergence of insurtech startups, and an aging workforce were all forcing employers to rethink their talent-management strategies.

When the pandemic hit in early 2020, then, those challenges just added to the work that was underway.

That said, the insurance industry has tended to weather turbulent economies better than many other industries. “As we saw in the financial crisis in 2008/2009, the insurance industry was very resilient, and did not have a downturn in unemployment,” Jon Loftin, president and COO of MJ Insurance, tells Insurance Business.

“In fact, some people were aggressive coming out of it and they hired earlier than most. They were able to get some good talent based on the idea that insurance really is a stable industry.”

Still, the aforementioned challenges remain, as does the ongoing fallout from COVID-19 and its economic consequences.

Below, we explore the state of recruitment, hiring, and talent management in the insurance industry against that backdrop.

The Industry Must Identify Its Next Leaders Soon 

Insurance executives tend to be older than their peers in other industries, which presents both a challenge and an opportunity.

The opportunity is in the wisdom and industry knowledge that veteran insurance professionals possess — and are willing to pass on.

This means, however, that new leadership must emerge, and quickly. As Calvin Trice writes at S&P Market Intelligence, the rate of retirement among industry leaders is outpacing the next group of would-be leaders, who traditionally have needed two-plus decades of experience to take the helm at major companies.

There are a few ways to bridge this talent gap. First, there are mentorship programs. “By instituting structured mentorship programs, insurance companies can create a pathway to prosperity for their younger workers that leaves them satisfied with their careers in the process,” Mary Ann Cook, senior vice president of knowledge resources at The Institutes, writes at Property Casualty 360

Then, there are more organic, on-the-job methods of accelerating leadership training. Cook points to industry conferences and professional development programs, but internal company changes can be beneficial, too.

These changes can include dedicated efforts to create new opportunities for talented people, and to empower their ideas, write Ashley Heline and Leah Ohodnicki, both at insurance provider Argo Group. 

“Encourage new ideas and give early-career professionals the chance to execute on their ideas,” they advise. “Provide the guidance and feedback necessary to help ensure they are successful.”

two coworkers chat in a boardroom; talent management insurance concept

Tech Fluency Will Be Necessary Across All Departments

The business of assessing risk, underwriting products, and selling insurance looks vastly different than it did a decade ago.

Today, insurers operate under an ecosystemic framework in which carriers, reinsurers, and niche product providers orient themselves around discrete needs of each individual customer. The backbone of that ecosystem is robust technology, which has been integrated into the workflows of nearly every insurance professional.

Therefore, people building careers in the insurance industry today are having to get up to speed on artificial intelligence, automation, machine learning, and a variety of other important technologies, all of which are evolving rapidly.

“To build a business model of the future, insurers must consider how to attract tech-savvy talent through assessing competitive rates of pay both within and outside their sectors — and reconsidering their value proposition as an employer,” says veteran human capital strategist and digital transformation advisor Dan Weber

“This means changing the mindset of technology being a back-office role to one that is driving the relevance of the entire firm and engaging with customers to deliver an enhanced product or service.”

This has several implications for insurance workforces. First, it means the emerging leaders mentioned earlier will need to be able to navigate and, ideally, help build these ecosystems. 

“[W]e believe leaders must incorporate ecosystem design into the operating model design process and pressure-test old boundaries, become more expansive in the scope and aspirations of the redesign, and explicitly create more flexible organizational perimeters that effectively utilize the concentric circles of people and organizations within an ecosystem,” Wouter Aghina, Steven Aronowitz, and Caitlin Hewes at McKinsey write.

This also means frequent — likely ongoing — training will be necessary, which requires a bottom-up commitment from all employees. “Whatever their respective roles, employees need to feel that they are part of a collective journey,” PwC’s Bhushan Sethi and Julia Lamm write. “When they fully grasp what’s in it for them, a culture of digital curiosity, self-learning, and innovation should follow.”

Upskilling and Reskilling Are the New Normal

That culture of curiosity and self-learning will be necessary to fuel the upskilling and reskilling initiatives that are going to be common features of any insurance organization’s operations.

As McKinsey’s Tanguy Catlin, Ari Chester, Julie Goran, Megan McConnell, and Scott Rutherford write, such initiatives must begin with an understanding of each team member’s capabilities and an understanding of what skills gaps remain relative to the organization’s goals.

The plan, then, would be to deliver training and development that bridge that gap. “Most insurers lack vigorous learning and development (L&D) infrastructure,” they warn, “but it is critical to reskilling or upskilling the workforce. 

“Best-in-class L&D programs incorporate up-to-date insights on adult learning methods, and mix in-person, digital, and—especially important—on-the-job learning, where 80 percent of adult learning happens. 

open laptop displaying a videochat meeting; talent management insurance concept

Companies Must Define That New Culture in a Post-Pandemic Economy

Here’s where COVID-19 adds a degree of difficulty.

It’s challenging enough to get whole workforces to buy into cultural changes and the need for rapid upskilling. These efforts become much harder when issues of public health and job precarity are at the front of people’s minds.

Harder, still, is finding traction among employees who are still in ad-hoc remote-work arrangements. 

“It is certainly true that remote management is the hardest part of running a remote workforce,” writes Laura J. Hay, KPMG International’s global head of insurance. “That is why organizations need to pay as much attention to how they are supporting managers and team leaders as to how they are supporting the workforce at large.

“Managing a team that is not physically present, ensuring that people feel motivated and supported, helping them to perform at their creative best, looking after individuals’ mental and emotional wellbeing in a strange and stressful time, setting goals and assessing performance – there is no real road map for this on the scale that we are presently seeing through COVID-19.”

In July 2020, McKinsey’s Andrea Alexander, Aaron De Smet, and Mihir Mysore published a piece on the challenge reintegrating remote team members after the pandemic. Very likely, as many companies are now seeing, some employees prefer the work-from-home arrangement while others missed being in the office. Balancing the needs of both groups can be tricky.

“Organizations thrive through a sense of belonging and shared purpose that can easily get lost when two cultures emerge,” they write. “When this happens, our experience—and the experience at HP, IBM, and Yahoo!—is that the in-person culture comes to dominate, disenfranchising those who are working remotely.”

Bridging that gap, and ensuring that gap doesn’t open up a chasm in your company’s culture, will be the task of management and of HR leaders. It will involve tracking the relative levels of engagement among team members, making sure everyone — remote and on-site — feels heard when a decision is made, and creating psychological safe space for people to take risks and learn, the McKinsey researchers say.

Navigate that challenge, and you will have laid the groundwork for the digital transformations and succession planning necessary to guide the insurance industry toward future success.

Images by: BBH Singapore, Amy Hirschi, Chris Montgomery