The insurance industry is currently grappling with a significant challenge: staff shortages. Last year, the Hong Kong Insurance Authority (HKIA) reported that it is facing a shortage of personnel, with the regulator understaffed by around 10%. In 2022, Randstad reported that IFRS 17 and regional consolidation was “driving significant talent demand in Singapore’s insurance industry”.
The insurance sector as a whole is currently grappling with a worker shortfall, as demonstrated by various data points. In the US, the insurance industry's unemployment rate has remained at around 2.1% over the last six months, a figure that is notably lower than the national average. Insurance carriers are employing approximately 1.56 million people in the US, which represents a decrease of about 85,000 jobs since 2020.
However, this decline in employment is not due to a lack of hiring efforts, with nearly two-thirds (61%) of insurance companies citing an expected increase in business volume as their primary reason for hiring. Rather, insurance companies are struggling to replace workers who are leaving the industry at a rapid pace. In the past decade, insurance companies typically operated with a staff turnover rate of about 8-9% but this figure has recently increased to a range of 12-15%.
As a result, 48% of insurance companies believe that hiring talent has become increasingly difficult compared to the previous year, and the financial services and insurance industries currently have a record high of 367,000 open jobs in 2022.
Making the industry more attractive
These staff shortages in the sector have led to a domino effect of negative consequences, further exacerbating the industry's challenges. The increasing number of resignations has resulted in higher costs for advertising, interviewing, hiring, and maintaining new employees. This situation means the remaining employees are burdened with a higher volume of tasks, leading to decreased productivity and significant backlogs, and eventually burnout. Moreover, the high turnover rates have translated into greater losses, with agencies witnessing more instances of red across their balance sheets.
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The causes for this shortfall are many-fold, and we observe among them: an ageing workforce, a perceived lack of innovation, and an inflexible and traditional culture.
The key question to answer is, how can the industry address these challenges to ensure its growth and sustainability in an increasingly competitive future? Even without these talent challenges, Covid has forced insurers and partners to consider a number of innovative solutions, including the following:
- Flexible working arrangements. Implementing flexible working arrangements, such as remote work options and adjustable schedules, can help create a more inclusive and appealing work environment. These changes are appealing to the kind of lifestyle yearned for by younger employees while allowing older workers to enjoy better work-life balance, reducing the risk of burnout and attrition.
- Embracing ESG values. By embracing ESG values, insurers and partners can cultivate a culture of diversity and inclusion, ensuring their organizations resonate with employees who seek meaningful work and a positive impact on society.
- Revising compensation schemes and structures. Adopting flexible compensation schemes and flatter organisational structures can help provide employees with clearer career progression pathways. This approach would encourage skilled workers who might otherwise look elsewhere for professional growth.
- Real-time recognition and reward. To boost employee retention, insurers and partners are investing in capabilities to enable them to provide instant recognition and rewards to employees. There are benefits to real-time recognition as it has been seen to boost employee morale and reinforces positive behaviours among peers. As a result, it promotes a culture of positive feedback and appreciation. In addition, fostering a sense of belonging improves the employee’s experience in an organization, leading to better engagement, retention and productivity.
- Promoting employee wellness. Insurers and partners can invest in a comprehensive approach to employee wellness, covering physical, mental and financial well-being. This can be done in a variety of ways, including fitness events, nutrition workshops, stress management seminars, rewards and incentives for meeting health goals, and telemedicine services. By prioritising and supporting employee health in all aspects, companies can foster a culture of well-being, leading to improved productivity, job satisfaction, and reduced healthcare costs.
- Implementing robotic process automation (RPA) tools. The automation of repetitive tasks allows employees to focus on higher-value work. This not only improves end-to-end process flows but also enables insurers and partners to reassign employees to other more valuable roles that are in shortfall, which may also be more attractive and fulfilling for them.
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Ultimately, a culture of innovation and adopting forward-thinking strategies make workers excited about helping companies secure a competitive edge in the industry.
The hopes (and concerns) that AI brings
Possibly the most exciting development in recent times is how Artificial intelligence (AI) and other advanced technologies can play a significant role in addressing staff shortages.
AI applications can predict employee turnover by analysing patterns and probabilities, giving stakeholders advance notice to address potential issues before they arise. These systems can also monitor background metrics to identify employees experiencing work stress, burnout, or depression, enabling managers to proactively address these concerns. Finally, AI can automate recruitment processes by vetting qualified candidates from job application repositories and presenting hiring options to managers, thus minimizing disruption to business operations.
It is clear that the hope is that AI's potential to optimise operational processes by automating repetitive tasks and reducing human intervention can also help lower overall manpower costs and address overstaffing concerns.
However, despite the promising developments in AI and its applications, it is crucial to approach its adoption with a degree of caution. The future of AI and its impact on industries and workforces remains uncertain, and it is essential to strike a balance between leveraging these advanced technologies and maintaining a human-centric approach to addressing staff shortages and improving overall employee well-being.
Challenges in the short-term
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There are also challenges that ambitious companies need to navigate as they chart their progress forward.
- Resistance from existing employees. Employees need to understand in order to embrace the changes envisioned. Education, awareness, and engagement initiatives can help address their concerns and foster a sense of job security.
- Balancing workload for HR and other teams. A period of dynamic change will likely overburden HR and other teams, who must juggle the new changes alongside their day-to-day responsibilities. Allocating adequate resources and providing support to these teams is crucial to ensure a smooth transition.
- Managing increased costs associated with innovation. Innovative approaches may entail higher costs, especially in the short-term, which will impede implementation. Insurers and partners need to weigh the long-term benefits of these solutions against their costs to make informed decisions.
Undoubtedly, innovative solutions are crucial for insurers and partners to address the pressing issue of staff shortages in the insurance industry. The target must be for insurers and partners to attract and retain talent while transforming the industry for a sustainable and competitive future. As the industry continues to evolve, adopting innovative approaches and fostering a culture of continuous improvement will be key to overcoming challenges and ensuring long-term success.
Lawrence Yeoh is the chief solutions officer of Fermion
