The Aging of the Insurance Industry Workforce | Episode 2
Today’s aging insurance industry workforce faces serious challenges as many of its baby-boomer professionals are on the cusp of retirement, with a shortage of younger workers available to fill the void. Listen as Caryn Warner, Director of Marketing, discusses the industry’s demographic issues and possible solutions with Insurance Market Strategist Candace Thornton.
Caryn Warner: Hello, and welcome to another episode of Sapiens Insurance 360 Podcast. I’m your host, Caryn Warner, Director of Marketing at Sapiens, and I’m really excited that you’re out there listening. This is where we discuss the latest news, trends, and issues from across the insurance solutions and technology spectrum. Today we’ve got a great session, because we have a great guest in Candace Thornton. We’ll be talking about the aging of the insurance industry workforce. Candace is a B2B tech and data solutions market fit strategist, as well as a P&C subject matter expert, thought leader, and speaker. Candace was previously with Verisk Insurance Solutions for over 10 years in strategic sales, marketing, and competitive intelligence. Candace, welcome to the program.
Candace Thornton: Thank you!
Caryn Warner: So you’ve been a champion on the topic of talent drain in the insurance industry for years, and have served as a source of information about it to raise awareness and mitigate the risk of what we’ve called the brain drain.
Candace Thornton: That’s right. Caryn, do you remember why the term talent drain became big in the insurance industry?
Caryn Warner: I do seem to remember, but why don’t you just set the stage for our listeners?
Candace Thornton: Well, I started studying demographics about 20 years ago, and at that time, you had the generational cohorts of the boomers, the Gen X, and the Gen Y, and I studied each group to understand future buying behaviors. It’s the whole right product, right place, right time concept. Those insights help with product development, sales, and distribution preferences, right? Well, insurance companies, including agencies, soon realized, oh wow, we have a bubble of boomers as employees, and that would’ve been fine. As people retire, you just hire the next generation. The boomers being so large had kids called the Gen Ys, the oldest Gen Ys were 22 coming out of college, and they would’ve been good to start replenishing the hiring boomer staff. It should have been all good, but Caryn, at this time, guess what else was happening?
Caryn Warner: All right, so that was about 20 years ago. This was just about the time I was getting into insurance, but I’m not sure that in the early two thousands everyone was thinking about going into insurance. Is that correct?
Candace Thornton: That’s right. You know who they were thinking about? Google. So Google was 25 years old this year. Apple’s iPod, a thousand songs in your pocket, came out in 2001, and the iPhone in 2007. That was 16 years ago. Can you imagine a time before that device? So the digital era had kicked in, we heard tech companies being referred to as sexy.
Caryn Warner: Yeah, I don’t think the term ‘sexy’ was how the insurance industry jobs were described. Were carriers having an issue with filling headcount at that time? We know it’s been reported as an issue now. So perhaps you can share some metrics related to difficulties in recruiting then versus now?
Candace Thornton: Yes, and let’s bridge the context as before and after the Covid shutdown, right? So one source to look at is the Bureau of Labor Statistics. It reports employment by industry. So in the finance and insurance sector, in 2020, the annual average for job openings was 248,000 openings. Well, that was high, but check this. In 2002, the annual average for job openings was 386,000, even higher record highs! And I’ll pull in another source for detail. So Jacobsononline.com, that research firm’s annual study on the insurance industry labor market, tells us that for several years leading up to Covid, and as of January 2023, one of the most common reasons carriers say they planned to increase staff is because they are understaffed. And the bureau corroborates that, too. So last year the insurance industry headcount grew less than 2%, and that was less than anticipated. It has been and is, a tight labor market.
Caryn Warner: All right, so, so let’s just unpack this for a minute, because what I’m hearing you say is that there are few underlying causes for the tightening of the labor market that is specific to insurers. So the first is that the industry lacks appeal as a whole. It hasn’t necessarily been perceived as quick to adopt the sexy new tech that the labor market entrants grew up on and rely upon to enable their everyday work. And this in turn limits industry innovation in general, and challenges maybe specific in insurers who haven’t yet adopted the infrastructure that can best attract and enable talent to keep up with their more tech-enabled peers. So is that fair?
Candace Thornton: Yep, exactly.
Caryn Warner: Okay. And then two, to make up for this perception, justified or not, that keeps new labor market entrants from proactively considering insurance as a career in general, or perhaps specific insurers who haven’t evolved their twosome practices, the costs to attract the talent increases, then is that a fair assessment?
Candace Thornton: Yep, and here’s what’s happening. So the Bureau of Labor Statistics, it also slices up data by age and by insurance carriers versus agencies, brokers, and other related activities. So everyone can just go to bls.gov, it’s free and also are the reports from Jacobsononline.com. Those insurance labor market studies are free. And here’s one of the interesting inferences. So chunks of the talent pool who would have gone into carriers are not going into a carrier. MGAs are very attractive alternatives. And the impact of that, while the brains may still be in industry, is that the carriers have to offer more competitive salaries to attract talent. And that report says that year-over-year compensation expenses have increased at carriers at 6%, and they compare that to the last 12 months for the carrier employee merit increases, and that was only 4%. So you see the difference?
Caryn Warner: Yeah, I can see that being a problem.
Candace Thornton: Yeah. And it’s been building up over time. So back in 2009, the great recession, many carriers flattened their org structures. The mid-career people have had to job-hop to, you know, get promoted and also think about the insurtech movement. Very attractive alternatives, too. Although the insurtech term I’d say got popular about eight years ago, those people were already deeply engaged with reinventing bite-sized aspects, harnessing the velocity of digital options that were coming to light almost every day. All of this adds up to mean that carriers are going through some real pain in trying to fill spots.
Caryn Warner: So within the carriers, then, where, where are they having the most trouble in terms of filling the spots?
Candace Thornton: Well, it is actually where you’d expect, so the Jacobson report says the hardest ones to fill with staff are in technology, actuarial, underwriting, analytics, and in claims. And in that order, and this is all despite the industry already wrapping their arms around employee engagement topics. I mean, well before Covid, the industry had already been offering remote jobs for the right candidates. Towers Watson reported for years already that sustaining employee engagement means focusing on motivation, enablement, energizing staff. Fortune magazine reported just last September that older workers will postpone retirement if they find meaning in their work. They view work as an outlet for curiosity, for intellectual energy and, you know, younger workers, so Accenture says that graduates are looking to, you know, number one, work with purpose, and number two, have access and work with tools that are cutting edge and innovative. Insurance has a lot to offer right here. And I’ll add that those insurance companies that are insurtechs are hyper-focused. They are fixing things related to improving customer experience. That is work of great purpose. And every time I listen to an insurtech leader talk, the energy is just infectious.
Caryn Warner: Yeah, I, I’d have to say I agree. The insurance industry is all about purpose. The whole point of insurance is to serve our communities. But you and I know that there are a lot of fabulous careers in insurance. There’s, you know, corporate functions, field staff, small business ownership, client service, back office, there’s marketing, and catastrophe modeling, all work in concert for the purpose of helping, helping people and communities be whole in case accidents or disasters happened. So I, I then actually have to ask, what is the way forward here?
Candace Thornton: So talent drain is essentially a deficit in backfilling staff. It’s for the normal passing of the guard. To address the aging workforce, number one, you must have the bandwidth to gather knowledge to pass it on. That will address the brain strain. Number two, to bypass the time component. When you get that knowledge, it needs to become scalable. So it won’t matter if people have already retired. With the scale, you will address the aspect of having sustainable workflows. And three, only when those are addressed, will you be able to think about innovation. Insurance is a people industry. Information and technology are tools to solve problems. So we need to look at all this from the lens of technology. That’s what’s changed. You’ve got suppliers and insurtechs, carriers with incubators, and transformation teams. They each have been working for years on developing nimble, cloud-based, big data-enabled solutions, all that offer better customer experiences because of the use of digitalization. And these actions have at the same time, been fixing a lot of talent drain issues. For each automation achievement, it frees up more bandwidth so the brains can program more and more.
I mean, the oldest of the boomers hit 68 nine years ago. That means the younger half of the boomers are still in the workforce. They’re between the ages of 59 and 68 right now. Their brains are being tasked. And you also have all these energized Gen Xers, Gen Ys, and now Gen Zs who grew up using digital tools that weren’t even invented 30 years ago. So that all leads us toward scale. You know, during Covid-19, the suppliers who were already doing all this innovative work could help the carriers pretty quickly with those massive operational shifts. This is where the answers lie: it’s with enabling humans through technology. It is not about cutting humans. It’s been too hard to fill those slots already. It is about attracting humans to stay and to join. So all that tech enablement should help with attracting more entry-level staff. Here’s a cool stat about entry level, referring back to that insurance labor market study. Carriers’ business plans have changed, to be more open to entry level staff in roles that are their most difficult to fill, such as underwriting. So think about this contrast: back in 2019, carriers hiring underwriters were planning for 23% of them to be as entry-level staff, while in January, this year, the update to that number, their expectation has dramatically increased to planning for 38%, not 23, 38% of underwriters to be hired in as entry level.
Caryn Warner: Yeah, it’s a, it’s a big jump. And I imagine for this to be able to work for entry-level underwriters or MGUs serving up information instantly would be critical. Customers expect quotes and binding to be almost instant. Even experienced underwriters don’t have time anymore to do large-scale analyses. So tech is a good fit there. I can also see it being critical for speed to market, in standing up new products, or for low-incidence products such as home-sharing policies. It would take too much time for an agent, MGA or MGU, to go back and forth with several carrier underwriters and taking that much time leaves new agents vulnerable to criticism. So yeah, tech enablement is an ideal tool for the scenario. Overall, I’m thinking if today’s mentors can be tapped, then tech can serve up their brains at scale.
Candace Thornton: I think you just made a tagline, brains at scale. That’s pretty funny!
Caryn Warner: You know it could be interesting, right? All right, so listen, we’re starting to run short on time. Can you sum it all up for us?
Candace Thornton: Perfect. Let’s do that. So the industry needed to automate mundane tasks, you know, free up human bandwidth regardless. Luckily, there’s been a tech explosion of possibilities and our industry’s many left-brained brains have been working hard, whether their eyes were on straight-through processing or whatnot for the end customer. All that programming and ideas are applicable to the employee workflows too. All right, though talent drain has been looming, the explosion of tech has enabled the people who really understand the insurance industry to start building up scalable, sustainable workflows for today. And this means that for each step they take, bandwidth gets expanded so they can innovate for the future. This is not about cutting jobs. There is plenty of work to do, tech builders, tech-enabled users, and there is plenty of potential for customer acquisition and servicing them. There are too many out there, we all know who are not insured or underinsured. Plus, this digital era itself has created new risk categories, new ways to collect and measure risk for the old and new topics, cyber, flood, wildfire, other catastrophes, parametric insurance, last mile, autonomous vehicles, and artificial intelligence, telematics, IoT, metadata forensics, aerial sciences, and lidar. Those are just to name a few. All the things we do in the insurance industry are for the united sense of purpose to help people. I think we’re in a pretty cool industry.
Caryn Warner: I think we are too. And I also think this has been incredibly informative. Thank you. You’ve provided great background color, and solutions with regard to the aging of the insurance industry’s workforce. I believe our audience will appreciate the insights you’ve shared. Thank you so much for joining. And thanks to everyone for listening. Be sure to tune in next time to Sapiens Insurance 360.