Global Insurers on Workforce Risks: Six Challenges, Three Pathways
The insurance industry faces substantial risks as demand for its services continues to grow—not only financial, regulatory, and operational risks, but also the risks of not having the right talent and talent management practices in place to successfully meet the challenges of global competitiveness.
Mercer recently conducted research that identifies these challenges and examines their workforce implications. The study collected and examined the perspectives of executives from 20 industry leaders in North America, Europe, and Asia.
In all, six major challenges were examined, and three key pathways for successfully meeting them were identified. It’s important to note that while these issues and solutions were raised in the context of the insurance industry, they may be viewed as applicable to other industries as well, given the increasingly global nature of 21st-century business.
The most widely shared, consequential challenges the industry faces now include:
- Technology and big data. The industry must capitalize on mobile and web-based opportunities, use big data and predictive analytics effectively, and overcome the problems associated with legacy technologies.
- Growth. Low growth in mature economies combined with the potential for high growth in emerging economies.
- Customer focus. The need to create better, more comprehensive customer relationships and make it easier for customers to do business with insurance companies.
- Regulation. Operating under multiple regulatory jurisdictions and complying with changing rules around capital requirements, customer interaction, as well as transparency and reporting.
- Alternative investments. Managing more complex portfolios with nontraditional assets in a low interest rate, low economic growth environment.
- Leadership. Addressing inadequate talent pipelines for effective leadership in the future.
Insurance has always been an industry that relies heavily on expertise and specialized skills in its workforce. But even with automated underwriting and web-based customer self-service, the human composition of the workforce will be critical to driving innovation and adaptation to change.
What are the connections between the six challenges and the likely pathways to overcoming them successfully? Here are the three strategic considerations we identified that relate to how each company can pave its road to success.
Embracing Non-Traditional Talent—The six challenges are forcing companies to embrace skill sets, knowledge, and experiences previously not dominant in the insurance sector’s workforce. For example, analyzing big data to develop new products and services requires the know-how of data scientists who are just now coming onto the scene.
In addition, growth in emerging markets requires a local workforce. But these markets are often characterized by thin labor markets and relatively low supplies of core insurance professionals.
The business need for new types of talent may push employers to recruit from new sources.
The business need for new types of talent may push employers to recruit from new sources. For entry-level positions, that may mean recruiting new graduates that have not previously been a focus. For experienced talent, it may mean looking outside the insurance industry and successfully integrating experienced individuals from other sectors.
But getting new talent in the door may be difficult. In many respects, the industry is not favorably positioned to bring in nontraditional talent. Some interviewees cited the industry’s conservative reputation as a potential obstacle.
Embracing nontraditional talent is not just about getting the right people in the door—it’s also about retaining these workers and enabling them to flourish. Some employers will need to change how workplaces are managed to accommodate a variety of culture-based expectations of employees in emerging markets or to prepare for generational differences that can surface with a new wave of technology-driven, big-data talent.
Adapting Talent Strategies—All employers make strategic choices about hiring from the outside or building leadership talent already on board.
Many insurance companies emphasize building leadership talent from within, given the value of an employee’s long-term service to a company. If well managed, long careers within one company can produce leaders with great depth of knowledge in specialty areas as well as breadth of knowledge about products, markets, and the business processes supporting them.
But going forward, fundamental strategic choices about leadership capability will become more nuanced and complex. Challenges inherent to doing business in emerging markets and successfully capturing value through technology and analytics, for example, may require different hiring choices than meeting the leadership challenges inherent in alternative investment management.
Likewise, strategic choices about workforce cost management may also become more complex. We believe that many of the six major challenges will increase the need to be savvy about how to reduce workforce costs (such as relocation and other expenses) versus the need to make significant investments in people in order to meet business objectives.
The need to embrace nontraditional talent also has implications for how that talent is managed. Enhancing standard core talent management practices—supervision, performance evaluation, reward, development, and so on—may become necessary to create the conditions that best retain and unleash the productive potential of nontraditional talent. Those adaptations will likely be best articulated in the context of an explicit, overarching strategic view of talent management in the enterprise.
Increasing Analytic Capabilities—A human resources executive’s capacity to meet these challenges is hindered by the current state of HR analytics capabilities. In the interviews, we heard that developing these analytics capabilities should be a priority given their value in meeting the challenges facing large employers in the industry today.
Consider the challenge of ensuring an adequate supply of leadership talent in the company and one talent management tactic—internal mobility—as it relates to developing leaders.
Strong analytics can help deliver a business case for investing in internal leadership development or simply hiring from the outside. This enables the employer to make strategic choices about future leadership based on the strong business case for or against mobility.
Analytics can also inform talent management practices as they relate to other challenges. Successfully embracing nontraditional talent requires not just new people in the organization but also new practices. A worthy analytics capability can help accelerate the successful adaptation of talent management practices to employees in the technology and data science areas and in emerging market locations. And predictive analytics can position the enterprise to better identify high-potential individuals as well as those people whose departure the company would like to prevent.
As companies navigate these strategic considerations, improving analytics capabilities should come more naturally, as these types of capabilities have historically been an industry strength.