11/24/2010

A May-December Affair

Attracting the young generation to the insurance industry may seem unlikely, but it could be a match made in heaven.

By James R. Jones, CPCU, AIC, ARM, AIS

In reading through insurance industry publications, listening to industry presentations at conferences, and talking with HR professionals, we see a growing awareness that the insurance industry is facing an impending talent crunch as the baby boomers retire, along with a grudging admission that the industry may not be viewed as very attractive or enticing.

A 2010 survey by The Reputation Institute found the insurance industry's reputation, as measured by admiration, trust, good feeling and overall esteem, ranked in the bottom quartile of all industries. Insurers also have greater exposure to the aging workforce than most industries, due to a focus on experienced workers and a pattern of living off existing "inventory" of professionals. According to a 2010 McKinsey study, the number of insurance workers age 55 or older has increased by 74% in the last 10 years, compared to a 45% increase for the overall workforce. This means that 20% of the insurance workforce is near retirement age (compared to 15% of the broader financial services workforce). Furthermore, there is a perception that claims has less to offer the next generation than even other professions within the insurance industry.
The good news is that the reputation of the insurance industry does not match the reality. It turns out that the industry actually does have what the next generation is interested in, and once this is discovered, younger people will seek out careers in insurance. For the 60-million-strong members of Generation Y, or Millennials, interested in work-life balance, intellectual challenges, and doing something meaningful, the insurance industry, in general, and claims, specifically, appear to be a good match. According to a recent survey of alumni majoring in insurance and risk management, 83% agree the industry offers a good work-life balance, 93% believe insurance professions provide frequent intellectual challenges and are interesting, and 94% agree that the industry provides significant value to society.
One key problem is a lack of awareness by students in high school or college about careers in insurance. The Griffith Insurance Education Foundation has been educating high school educators for over 20 years about the insurance industry. Griffith's program director, Jason Terrell, states that he consistently hears comments from high school teachers and guidance counselors such as "we had no idea the industry had so many opportunities and such diverse jobs." College students have the same comments. Some colleges present innovative options for students to increase their exposure to unknown industries and options. For example, The Katie School of Insurance at Illinois State University offers an opportunity for honors students of any major to take part in an industry awareness program that includes the elective course Introduction to Risk and Insurance, a meeting with industry leaders and young alumni working in the industry, and writing a paper on industry careers and issues. Over several years, more than half of these honors students have decided to pursue a career in the insurance industry. Table 1 shows a list of just a few organizations working on developing awareness of insurance careers.

The industry now has an opportunity to capitalize on current economic trends and changes in employer hiring trends in other industries. Banks and other financial institutions face even greater challenges than insurers, and many of the traditional back-office finance jobs are being consolidated and becoming less attractive to graduates. Nearly half of the RMI majors at Illinois State University are also finance majors. Many of these students recently added the RMI major so that they would have greater job opportunities.

Overcoming Misconceptions
The industry sometimes is its own worst enemy by harboring misconceptions about Gen Y. The following are examples of "conventional wisdom" about the challenges in employing this generation along with comments and suggestions for dealing with them.

Perceived Challenge 1: Younger people think that working in insurance claims is repetitive and boring.
Comment: It depends. In addition to their claim center jobs, it is important for insurers to draw "a line of sight" for promising new hires by having them job-shadow an experienced adjuster for a day or two or attend claims-related meetings with agents, underwriters and loss control professionals. Show them how they will, at some point, be able to use their skills.

Perceived Challenge 2: The younger generation lacks loyalty and will leave for another employer for a small jump in salary. This makes them a poor investment for companies.
Comment: Although Millennials are motivated by money, they also have a deep desire to develop skills and credentials, have flexible work arrangements, establish a good work-life balance, and receive recognition for their efforts. Meeting these needs, along with providing a boss and others who have a sincere desire to mentor employees, are things that attract and keep them beyond just the money.

Perceived Challenge 3: Small insurers and third party administrators can't compete with large companies for young talent.
Comment: Gen Y-ers want to add strategic value as well as production value. In fact, they often need to be told that they must add production value first. Many of them have had courses in strategy and management and have exposure to a big-picture perspective at a much younger age. Small companies can explain the advantages of having an opportunity to meet with executives who deal with strategic issues. Even just having lunch with executives to hear about the challenges the industry faces would be something unlikely to occur at a larger company and is something they would find attractive.

Perceived Challenge 4: The younger generation doesn't want to work.
Comment: Slackers exist in every generation. However, Generation Y has a large number of college grads who worked, did internships, went to class, volunteered for community service and were officers in student organizations. These students are often surprised to learn that this perception of their generation exists because they see those who don't work hard as the minority. Motivated students want to be rewarded based on performance, not just seniority. Hire them!

Perceived Challenge 5: The younger generation wants work-life balance.
Comment: Yes. So does everyone else. Gen Y is just the first to ask for it at a young age. Having a way for workers to balance their work and other life demands through remote work and flexible work arrangements helps attract and retain not only younger workers but also baby boomers dealing with aging parents and with kids.
The Skills for Success
As the industry begins to recruit the next generation of talent, it is time to reassess what skills, personal characteristics, and motivations are truly needed to succeed. In order to make this determination, it is important to consider what the environment of the future will look like. Some of the key trends include working remotely; outsourcing activities to vendors here and abroad; managing myriad technologies; making business decisions using a growing amount of information; and working in an environment of constant change and increasing complexity.

Technology is enabling the workforce to do work much differently than in the past. Routine or specialized parts of the process can by outsourced to a vendor. Information can be captured and processed electronically in an instant from around the world. People can work from their homes or even mobile offices. The Dieringer Research Group's 2009 survey showed almost 34 million adults telecommuted at least once per month. This is almost 30% higher than in 2005. Perhaps more interesting is the increase in working adults who telecommute almost every day. This has increased more than 10% since 2005 to total almost 14 million Americans in 2008.

In addition to working remotely, people are beginning to have more of their training and professional development offered through distance education. Additionally, a claims adjuster may now need to manage an array of vendors from across the country working on one claim. All of this occurs at a time when there is more volatility, uncertainty, complexity and ambiguity in the industry—related not just to technology but also to consumer demands, the legal and regulatory environment, company strategy, and competition.
Given this environment and these trends, the industry seems ripe for the new breed of employees. What's most needed at this juncture is an industry-wide effort to delineate the skills required for an insurance career, as well as some method of matching those skills with young recruits. Companies also must identify the next generation of leaders and prepare up-and-comers for leadership positions over the next decade. Logistical issues loom, and it doesn't seem that many in the industry have taken the necessary steps to erect or implement a plan for recruitment or succession. Questions such as what percent of managerial time will need to be devoted to developing people and their capabilities; what talent pools and geographies yield the most promising candidates; and what personal and academic attributes are most suited to the industry's strategic goals and daily functions need to be answered.

The Katie School at Illinois State University, in conjunction with Claims Advisor, is conducting a study of what skills, attributes and motivations are needed for recruits to thrive in the claims environment of the future. To participate in the study, go to http://my.ilstu.edu/~djgoebe/InsuranceSurvey.pdf and complete the confidential survey.
James R. Jones, CPCU, AIC, ARM, AIS, is director of Katie School of Insurance, Illinois State University.
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