Authors

Patricia Guinn 

Tricia Guinn

Leader of the Risk and Financial Services segment.

Towers Watson, New York

Ravin Jesuthasan 

Ravin Jesuthasan, CFA

Managing Director and Global Practice Leader, Talent Management.

Towers Watson, Chicago


Why not create a talent pool among noncompeting companies — an insurer and a web-based technology company, for example — to meet the industry need for new skills while offering growth opportunities to high-performing employees?


The insurance megatrends series

This is part two of a series of articles highlighting trends identified by industry leaders in Towers Watson's 2013 Insurance Megatrends Survey. The first article, appearing in our fall 2013 issue, featured a roundtable of our experts offering insight on and context for the survey findings.


The core of the insurance industry has traditionally been risk evaluation and mitigation, and this remains the case today. However, technology has begun to transform this industry as it has most other aspects of our lives. There is likely a lot of change to come. To remain competitive, insurers will need to adapt both how they do business and whom they employ.

Insurers have already seen the impact of technology on their ability to measure and manage risk and capital. In addition, their customers have benefited from greater choice and analytical depth as well as more transparent pricing. More recently, we have seen social media and big data transform other industries, and insurance cannot be far behind. These new technologies can offer valuable insights into customer needs and buying behavior, underwriting risks and pricing strategies. If insurers are slow to react, it creates the opportunity for new, technologically savvy competitors to enter the insurance space.

To capitalize on these new technologies and changing customer expectations, insurance companies are starting to change the way they do business. Some are embracing cloud-based computing technology; others are introducing new products such as usage-based insurance, and many are experimenting with social media to strengthen and grow their client base.

Underlying all of these initiatives is the need for a more diverse and technology-savvy workforce. Combine this need with the fact that the insurance industry is characterized by a fairly mature workforce — some 25% of U.S. finance and insurance industry workers are 55 or older* — and you get an industry that is at an inflection point in terms of its talent requirements.

Some feel that the compelling need for a new range of talent will be a challenge for an industry that has been somewhat slow to adapt in the past. Others believe it can be done but that it will require insurance industry management and HR professionals to challenge their own long-held beliefs around organization, work and how companies execute business models. Recent Towers Watson research suggests that many insurance leaders expect talent challenges in the years ahead, but comparatively few believe the industry is prepared to meet them.**

New Talent Requirements

New technology is already enabling underwriters to identify profitable customers, weed out the poor risks, generate near-instant policies, create more targeted products, reduce costs and improve customer satisfaction. Remote sensing technologies and mobile devices now allow claim adjusters to expedite claim payments and significantly reduce fraud. And more varied distribution channels are beginning to capitalize on social media to anticipate customer needs. Even the role of the actuary is changing as a result of these new technologies. Actuaries will be expected to gain deeper insights about customers and risks from the mountains of available data to develop more profitable products that provide greater value to customers.

In addition to introducing technology into traditional insurance functions, the industry will need to create new positions devoted to gathering and analyzing available data and using those data to make informed decisions.

Attracting and retaining these technology-proficient employees will be difficult. According to the 2012 – 2013 Towers Watson Global Talent Management and Rewards Study, more than 60% of survey respondents reported significant difficulty in attracting and retaining critical-skill and high-potential employees. Another study, Global Talent 2021, conducted by Oxford Economics and Towers Watson, anticipates that talent shortages in key technical and managerial areas in developed countries will increase dramatically over the next 10 years.

The issue is further complicated by the fact that insurers will be competing not only with other insurers, but other industries, for the same highly desirable human capital.

What New Employees Want

Surveys of young, technology-savvy professionals have found their employment requirements differ from earlier generations. Today's candidates want:***

  • Job security and the potential for long-term career development
  • A career that offers a wide variety of experiences
  • A job that offers a sense of purpose and greater meaning
  • Work environments with open social networks
  • A good work/life balance
  • Highly "wired" workspaces

Can the insurance industry fill these requirements? Initially, it might seem like a difficult case to make. Insurance is generally not considered the most exciting career, even if evidence contradicts this assumption. But it is actually both vital and relevant, as the evolving role of the actuary illustrates. New tools, vast amounts of data and the ability to act on those data are dramatically impacting the profession. Actuaries' roles are shifting from static to dynamic risk assessment and from passive risk mitigation to real-time risk optimization with stronger links to the business. Actuaries are increasingly called on to offer analysis and insight on important issues such as the coming retirement cliff, global regulation, longevity and health trends.

One way insurers can attract workers is by underscoring the positive role risk management plays in modern society — the good it can actually do for individuals, groups, companies, even countries. Prospective employees should be encouraged to know that as part of the insurance industry, they can actually make a difference. In addition to its social relevance, young hires should also appreciate the stability of the industry as well as the intellectual challenges it offers.

Newcomers to the insurance industry will also find that other insurance core skills like underwriting, distribution, sales and marketing (including social media) can be equally dynamic and relevant. The challenge for the insurance industry is to expand its talent attraction and retention efforts to focus on new skills as effectively as they historically have focused on actuaries and underwriters.

Some insurers, aware of what this new breed of worker is looking for, already are. AIG, a leading multinational insurance organization, already sees itself as competing for talent with Google and other Internet-related companies. To draw and retain talent, AIG and other insurers are finding ways to create more interesting and challenging jobs, with a focus on meeting career-long learning aspirations. AIG Senior Vice President David Bassi notes, "We want people who are entrepreneurial and curious. We don't expect them to conform. We do expect them to produce. We want people who challenge thinking."

At some of the more progressive insurers, HR managers are developing an evidence-based approach called "microsegmentation" to better understand their current and prospective talent pool, the value they can deliver and how they align with the strategic objectives of the organization (see figure). By breaking down and analyzing distinct segments of the workforce, these companies are determining how these segments deliver value to the organization and what those segments value from the organization in return. The process enables HR managers to find out which employees provide the greatest value and then develop ways to ensure those employees perform well.

Taking a page from the marketing playbook

Unfortunately, many insurers still value traditional skills over new ones. Conventional management approaches and the traditional insurance employment value proposition may be inappropriate for the new, tech-savvy workforce the industry needs to attract.

A New Model

Even prestigious high-tech firms are suffering from a shortage of skills, albeit of a different kind. While they may have the best software engineers, they do not have the best risk managers. High-tech firms also need to guard against uncertainty. The best risk management talent is at insurance companies, not at high-tech companies.

This disparity in skills and needs presents an interesting arbitrage opportunity. One possibility is a staffing model that pools the talent needs of several noncompeting companies. A corollary would be a collaborative production model in which companies pool resources based on their competitive advantages to collectively produce greater value than they might have been able to separately.

One example of a pool of noncompeting companies would be an insurer, a global retail bank and a high-tech company specializing in digital manipulation.

In such a collaborative model, the insurer could look to the high-tech company for the talent to harness social media and big data. The high-tech company, for its part, gets risk management expertise to protect itself from change and uncertainty. Likewise, the insurer could look to the global retail bank for help with customer relationship management and marketing. In return, the insurer could share its risk optimization skills with the bank. The high-tech company, interested in creating a global presence, could draw on the customer relationship skills of the bank, which could, in turn, use some help in building its digital platforms.

In each case, these symbiotic partners are looking to one another for access to the kind of talent and expertise they could never attract on their own. By using this collaborative model, these noncompeting companies can attract the talent they need to fuel growth and innovation without building infrastructure and taking on cost and risk.

Managing Change

Insurance leaders are increasingly aware of just how challenging their talent needs are. The aging of the insurance industry workforce combined with future industry growth create a significant hiring requirement. Many of these new hires will need to be technologically competent, and some will play completely new roles.

For an industry vying with others for the same scarce talent, the collaborative production model offers real possibilities. Instead of competing for talent, companies can partner and share. In doing so, they can achieve their goals without a huge investment in dedicated resources.

Understandably, the collaborative model described above may seem a bit extreme to some. Nevertheless, change is coming, and the fundamental principle of collaborating to share the costs and risks associated with growth can be a valuable addition to insurers' talent management strategies. Successful insurers are anticipating their talent needs now. HR professionals will play a vital role in determining how best to meet those talent needs. They will help management identify the skill gaps and develop innovative strategies for meeting these needs, whether through traditional talent acquisition and management approaches or more creative, collaborative means.

Throughout the difficult transitional period, management will need to keep an open mind, and take into consideration generational differences and cultural attributes that could affect employee motivation. The "old deal" offered to previous employees will not be right for the next generation of highly specialized employees, who will want their own deal.

New Tactics for Winning the Talent War

By Sean Hartley

The insurance industry is transforming from a product-centric to a customer-centric market. Gaining and acting on customer insight will become an important differentiator. Companies that can harness the power of social media and big data will have a huge competitive advantage.

However, that transition will require employees with completely new skill sets. Attracting and retaining digitally savvy employees with those skills will not be easy.

Unfortunately, we're starting from a disadvantage. We will be competing against not only other insurance companies, but also other industries. Let's face it; insurance is not seen as a sexy industry.

Yet somehow we are going to have to attract people with necessary skills. I have found that the best way to attract and retain sought-after talent is to give them what they want.

Previous generations have come to expect different things from their employers. Baby Boomers, for example, gravitated toward a stable, paternalistic workplace. Post-Boomer Gen Xers, for their part, were influenced by money and status.

Gen Y, however, is very different. The old employee value proposition has little appeal for these younger professionals. Rather than a fancy title or stability, they want interesting, rewarding work in a technologically advanced workplace, where there is real opportunity for advancement and at a company that is socially responsible. In short, they want a very different deal from what was previously offered.

Many managers may not like the sound of this, but we can't afford a rigid mindset. In this new digital environment, people and their capabilities will be crucial. If we can give new employees "their deal" and sustain it, we may be able to attract and retain them.

In our experience, the key to attraction and retention is employee development. At Aegon, we believe everyone has the capability to develop. Indeed, we feel employees need to take responsibility for their own development. But we also realize it is our responsibility to enable them.

We help employees learn and develop through different means that suit different learning styles:
on-the-job training, feedback, teamwork, formal programs, stretch assignments and project work.

But the key is the opportunity to grow.

The War for Talent

Under the best of circumstances, insurance companies may not be able to recruit enough digital manipulators and other Gen Y professionals to keep up with demand. Hiring established experts and then building a capability around them can be very expensive and take a long time.

Ideally, the answer is to find an inexpensive and fast way to develop internal skills.

One idea that we are developing, with the help of Towers Watson, is the concept of collaborative production, that is, gathering a group of noncompeting companies into a loose organization where they can share their respective skill sets. For example, a high-tech company might loan an employee with social media skills in return for an employee capable of improving its risk management function.

This concept benefits employers and employees.

Collaborating companies acquire needed skill sets at dramatically lower cost. For several months, the visiting employee can help get a new department up and running, develop a training regimen, pass on knowledge and then return to the home company. There is no expensive personnel search or difficult-to-break employee contract.

Visiting employees are challenged with meaningful and different work. More importantly, their skills are honed by a professional adventure that is also a career builder.

Incentive is created for employees — and their know-how — to stick around.

Moreover, exchanging employees cross-pollinates ideas among companies.

However, there are some wrinkles. For example, employee tax and legal implications, and confidentiality issues.

Managing an employee from a different company with possible differences in culture and attitudes about discipline may present a challenge. But learning how to manage visiting employees is part of a manager's development.

The right cross-employee mix is perhaps the biggest challenge, but one that brokerage screening of prospects and periodic follow-up interviews could solve.

The greatest benefit — for both employers and employees — is that we create an environment for success. A company rich in skills will have a tremendous competitive advantage.

For comments or questions, call or email
Tricia Guinn at +1 561 908 2922,
tricia.guinn@towerswatson.com; or
Ravin Jesuthasan at +1 312 201 5203,
ravin.jesuthasan@towerswatson.com.


Endnotes

* Talent Pressures and the Aging Workforce, Sloan Center on Aging and Workforce, Boston College. 2010

** Insurance Industry Megatrends Survey, Towers Watson. 2013

*** Human Capital Risk and Talent Management Issues in the Insurance Market, W. Jean Kwon, St. Johns University. 2013