16 February 2024
The global insurance industry has been growing at a slower rate than the economies in which they operate. In the United States and Europe, nominal GDP grew at a Compound Annual Growth Rate of 4 percent over the past 20 years, but premium growth grew at a CAGR of 2 percent (according to a 2023/2024 Market Overview by McKinsey). On the other hand, Forbes predicts that inflation, rising interest rates, climate change, and talent shortage will be ongoing challenges for the insurance industry in the upcoming future.
The unemployment rate in the U.S. has significantly decreased from its peak in 2020 (due to COVID), and now it’s around 3.5%. For those working in the U.S. insurance sector, unemployment is even lower, at about 2.1% for the past six months. This information comes from the latest ‘Insurance Labor Market Study’ by The Jacobson Group and Ward, which is a part of Aon, and was released for the third quarter of 2022. It’s worth mentioning that The Jacobson Group and Aon-Ward also conducted a study to investigate hiring trends within the insurance industry.The following presents the findings of an insurance labor survey conducted in the third quarter of 20231. You can download the results from the Q3 2023 iteration of The Jacobson Group and Aon-Ward Semi-Annual U.S.Insurance Labor Market Study2.
This study, which is published twice a year, looks into how the insurance industry hires and keeps employees. The most recent report examined around 270,000 workers in the U.S. insurance carrier market, representing about 17% of the total market. Most of these employees (77%) work in property and casualty (P&C) insurance, with the rest in life and health (L&H) insurance companies (22%) and reinsurance companies (1%).
In the past 10 years, most insurance companies operated with roughly an8-9%staff turnover rate, whereas now, it’s more typical for companies to operate in the12-15% range, with voluntary turnover spiking at more significant levels. Currently, insurance carriers in the U.S. have around 1.56 million employees, which is 85,000 fewer than in 2020. This drop highlights a significant trend in how the insurance industry is hiring and keeping workers.
Employee turnover is a natural part of business, but there are hidden costs directly tied to turnover rate. We often think of turnover in terms of lost talent, but the financial implications run deep. Let’s unravel the hidden costs associated with turnover.
1. Advertising:
As soon as you receive a resignation letter you begin the search for another employee. This isn’t as simple as a single post on your company website anymore. Recruiting agencies, hiring services, and temp agencies command fees. Plus, there’s the cost of ads on social platforms like Facebook or LinkedIn. And don’t forget job boards like Indeed or Monster. These seemingly small expenses add up quickly.
2. Interviewing, Screening, and Hiring:
Think about the time it takes to screen and interview candidates. For small to medium businesses, this often means key players are diverted from their core responsibilities. The question then arises: what important tasks are being left undone in the meantime?
3. On-boarding and Orientation:
On-boarding is no small task. Depending on the company and role, this process can span from a day to several weeks. It’s time that’s invested, but not directly productive.
4. Training Time:
Training isn’t just an investment of the new hire’s time, but also of those who train them. More often than not, managers and key personnel find themselves involved in the training process—explaining, answering, and rectifying. The “shadowing” process, while essential, does slow down production rates.
5. Lost Productivity and Opportunity:
Every hour spent on training or filling a vacancy is an hour lost in productivity. It’s crucial to ask: can management even step into the shoes of the departing employee? In most scenarios, they can’t. Managers are swamped with their own duties. Hence, time slips away, opportunities vanish, and the cycle continues.
6. Decreased Engagement:
Turnover doesn’t just impact the bottom line; it affects the morale of existing employees. Watching colleagues leave, especially well-performing and well-liked ones, can be disheartening. This often leads to decreased engagement and productivity among the remaining staff.
7. Errors:
New hires, despite their best efforts, have a learning curve. Mistakes are bound to happen. These inaccuracies not only disrupt the workflow but can be a potential liability. For businesses in professional services, errors might even open the doors to litigation.
8. Unemployment:
Unemployment isn’t just about paying benefits. It also encompasses the time and money spent on potential legal proceedings. Moreover, as more ex-employees file for unemployment, your unemployment insurance rates could skyrocket.
9. Worker’s Comp:
A direct correlation exists between high turnover and increased worker’s compensation claims. A rise in these claims can adversely affect your experience rating, leading to higher premiums. This translates to more lost income and missed opportunities.
10. Training Materials:
The tools used for training come with their own price tag. Whether it’s old-school printed materials or sophisticated online platforms, these costs are recurrent and often overlooked.
Strategies to reduce turnover rate for Insurance.
The insurance industry has been transitioning to digital and new ways of working during the pandemic, which has solidified the importance of flexibility, good relationships with coworkers and supervisors, and newer workplace values, such as diversity and inclusion and environmental consciousness.
Here are some strategies implemented by Staff Boom to reduce turnover rate through our outsourcing efforts specific to the insurance industry:
- Build a happy and healthy workforce: Providing preventive healthcare and adequate coverage for physical and mental health ailments can help build a healthy workforce.
- Provide opportunities for growth: Offering opportunities for growth and development can help employees feel valued and invested in their work.
- Offer flexible work arrangements: Providing flexible work arrangements such as remote work options can help employees achieve a better work-life balance.
- Improve communication: Improving communication between employees and management can help build trust and improve employee engagement.
- Create a positive work culture: Creating a positive work culture that values diversity, inclusion, and environmental consciousness can help attract and retain talent.
One of the ways insurers can adapt to all of the aforementioned changes is by outsourcing their non-core functions to third-party service providers. Outsourcing can help insurance companies deal with a high turnover rate by providing them with access to a larger pool of skilled professionals who can handle the workload1. This can help reduce the burden on existing employees and improve their job satisfaction, it’s here where Staff Boom comes in with several years of experience and several clients as well. Additionally, outsourcing can help insurance companies reduce costs by providing them with access to more affordable labor markets2.
In Conclusion:
Employee turnover isn’t just a HR metric; it’s a significant drain on resources. By understanding and addressing these hidden costs, businesses can better strategize their hiring processes, employee retention, and overall growth. Remember, every employee retained is money saved and an opportunity gained.
Relevant Links and Sources:
Phillips, Ebony, “Strategies to Reduce Employee Turnover in the Insurance Industry” (2023).Walden Dissertations and Doctoral Studies. 12185.
Market Report by McKinsey.
