Industry boomers are leaving, and taking decades of experience with them. Where are the future brokers, underwriters and actuaries coming from? Our Insurance Business roundtable -- sponsored by RSA--takes up the question
It’s a phenomenon by no means unique to the insurance business: as boomers march towards retirement, an increasing number of younger players are needed to fill their shoes. The same applies to underwriting and other sector positions.
But how does the industry go about attracting those new people and then, of course, retaining them?
Traditionally, brokerages have tried to identify “natural salespeople” and then provide them with the kind of on-the-job training needed to clinch deals. But the intricacies of increasingly complex product and the need for a whole new set of skills to satisfy client demands have spurred calls for a higher barrier to entry. As one broker asks, “Is it time to rethink who exactly qualifies as an insurance professional?”
This
Insurance Business roundtable, sponsored by RSA, is focused on capturing that debate on how the industry can attract not only young blood, but young, talented blood willing to stick around.
Listen in on the conversation.
SOURCING PROSPECTIVE PRODUCERS
John Walters: We tend to not hire from within the industry. Our experience has been that it’s more difficult to train people, and then you get yourself into a lot of litigation and unfortunate issues around the business with your current salespeople.
Our preference in the last five years has been to hire people who are new to the industry. They come from a variety of backgrounds.
We have a number of psychometric tests that we use and a pretty good interviewing process, but we tend to look for that sales aptitude as best as we can.
It’s their inclination. It’s people who think quickly on their feet. It’s the ability to respond quickly to new questions or objectives. These are skills that are very difficult to learn.
Michael Paisley: There’s two different ways of looking at it. You can either have an employee that you are going to be giving leads or a book of business to manage and a base to work from. Or, you’ll bring someone in and tell them, “Eat what you kill.” They’ll go and find clients and bring them in. A number of brokerages have relied upon the low-hanging fruit, house and car insurance. They’ll get books of business, and from there, they may get lucky and may have some clients.
Margaret Parent: Within the broker community, especially the areas you’re insuring, is there much swapping of staff? Do you compete with each other on the sales?
John Walters: There are a lot of brokers out there who are trying to raid salespeople. But I don’t even think it’s that sophisticated. The firm is looking for the book of business, and they accept or will tolerate the individuals and their leads. That’s the problem. The debris often floats around in the industry. The people are moving because they have to.
ARE TODAY’S AGENTS DIFFERENT?
Margaret Parent: The number of college programs has increased in the past eight years from the two colleges that were in Ontario to now eight across the country. Laurier University and University of Calgary have been in place for a while, and Laval has a program as well. The output of grads from those programs has obviously exponentially increased, which is excellent for the industry.
BCIT and Alberta have a 100 per cent placement rate to a combination of insurance companies and brokerages. It’s also a function of the employment situation in the West. BCIT has a wonderful career fair where the various employers all have their booths out, and it’s a 100 per cent placement rate for all of these colleges.
Michael Paisley: I think that you’re talking to entrepreneurs here, who basically fly in the face of any organized attempts to work in a box.
Margaret Parent: Career Connections has certainly expanded its outreach through to all the universities over the past eight years. The level of conversations we are having now are far more engaged.
We get an awful lot more in terest from students and graduates across the country. We’re having conversations where people are saying, “I think I’m interested in insurance; tell me a little bit more.”
Michael Paisley: There is a hunger for a job or career. They’re not coming in because they want to be in insurance. I have yet to meet a principal insurance broker who said, “That’s what I wanted to be when I grew up.” And what I find is that people are getting excited about the industry because this is a stable, solid industry that people can have a job or career in for the rest of their lives.
Margaret Parent: That’s part of our selling point as well. Not only do we milk the stability, we promote the variety as well and the capacity to enter, move, try different things, have different types of clients, do different roles, be able to build a career that does have the capacity to be varied, ongoing, different and changing.
This feature is from Insurance Business Canada's July Issue #2.3. To read more, please download the issue by clicking the link.
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SHORTAGE ON MANUFACTURER OR PRODUCER SIDE?
Michael Paisley: If you go into an account like Petro Canada, a national broker is going to write an account like this. They have thousands of locations, there are contracts, and they’ve got an army of people just doing certificates of insurance for everyone they’re doing business with.
You’re in the insurance business, you’re doing certificates. But that’s not what we do. There’s a place for that, and people have to be trained for that. There have to be underwriters who will sit down and do these things.
Have you ever seen what’s involved in doing a car application? It’s 75 pages long to write a car policy.
There are people who do this all day long, and they’re factory workers. They’re suited to working on the manufacturing side of insurance companies. But that’s a different animal than what’s needed on the brokerage side.
There are fewer and fewer people who I believe have a robust understanding of what we manufacture and what we sell. And the quality of the conversations around that are not as strong as they were in the past because it takes time to get people up to that level of knowledge. Looking at RSA data, we see a lot of people approaching the twilight of their careers, what we find is that the quantity and the quality of the knowledge further down to replace that is not on the same level.
And part of it is the industry’s fault because we’ve kind of started to automate things. We try and make everything a process, and we’re not teaching people the fundamentals of the business. I see every day with our underwriters that they’re great with (handling the) processes, but when you get to the end of the day, you wonder, was it a good underwriting decision?
Michael Paisley: When we got into this business, there were rates. I happened to ensure a building, in 1964 and I’ve got the underwriting notes, and it was a 4-cent rate. It’s still a 4-cent rate. The construction has not changed; it’s still poured concrete.
The only difference is that it’s now worth $300 a foot instead of $30 a foot.
I don’t think the industry is particularly viewed as attractive. Most people stumble into the industry rather than making it their career.
Whether we like it or not, we’ve still got this impression that’s created because of people’s experiences buying home and auto (insurance). When they hear about the insurance industry, that’s what they equate it with. But the commercial insurance business is phenomenally exciting.
Martin Thompson: I hear a lot of brokers complaining about the point we were making earlier on. What’s happening is you’re getting a lot of brokers paying a lot of money to salespeople who don’t cut the mustard, and a lot of brokers are starting to lose faith and patience with it.
HOW IS TRAINING BEING IMPROVED?
John Walters: If I look at the recruitment we’ve done, the development costs are extremely high. If you look at what it takes to pay someone a salary and then wait, it takes a four-year development.
The RSA was a big investor in terms of financing broker acquisitions; they won’t do that for a producer development. But if there were some means of validation for the program, I would support that. I would do more of them.
Martin Thompson: One of the things we currently do is a program called Making Partners, but I think that’s targeted more towards those who want a succession plan.
Michael Paisley: You’re looking for people who have the same values as you do, and I think that every broker out there has a slightly different culture. The success of the individual producer is based upon their ability to fit the culture of that organization.
What RSA or any other company could do for me is to take my raw talent, give them an understanding of the manufacturing side and the basic technical skills.
This feature is from Insurance Business Canada's July Issue #2.3. To read more, please download the issue by clicking the link.
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Stuck on the 21st Century Escalator
The industry’s 30- and 40-somethings may find their progress is blocked by baby boomers and ‘a broken escalator’
Margaret Parent, director, Professionals Division, at Insurance Institute of Canada, offers this analogy for the predicament “manufacturers” face in trying to retain developing talent as baby boomers remain on the job and at the top of the corporate ladder – or in her scenario, at the top of “a broken escalator.”
Margaret Parent: We’re working with a consultant, and she uses this analogy that normally you would put workers on a talent escalator. You might have them start as a junior underwriter, and then move up to a senior underwriter – for example they would have some level of professional development and career trajectory within your organization.
What’s happening is we have all of the boomers at the top of the escalator, using it like a treadmill. They’re doing their jobs, and they’re deciding on whether or not they want to retire anytime soon. If we did bring in new entrants into the industry – and we have done well with this – they’re at the bottom of the escalator.
Michael Paisley: That is so contrary to all the statistics you’re showing me. You’re looking at this wave of boomers at the top, who are going to be falling off, and all these 30- and 40-year-olds are looking at this huge opening gap, and you’re saying they’re leaving?
Martin Thompson: They’re not falling off right now. If you look at the stats, there’s a window of five to seven years.
Margaret Parent: If they’re senior underwriters and the person above them (leaves), the opening is VP, which is a huge gap for them. You haven’t actually enabled them to perform at the next level, something they would normally need in order to be ready for that opening. So it slows down the momentum and ends up with this backlog.
Michael Paisley: So we have to fire everyone over the age of 60 so that the 40-year-olds can move up?
Margaret Parent: For that middle, you’ve got cross-functional (training). There are companies that try to explain this squiggle line, which is not exactly the norm or expected. It might be that you have to take a step down to learn something about claims, and that in the end makes you a better manager.
Michael Paisley: But that doesn’t answer the problem of a large corporation with people that have been around a long time. How do the middle people get up there?
Margaret Parent: It helps, and it gives them broader skill development that in the meantime helps with them move into the next level.
Michael Paisley: So this gives the ones in the middle the opportunity to go across, so as (the mature workers) come off, (those in the middle) will be able to fill in
Margaret Parent: So now you’ve got all of these boomers at the top, and they’re on this treadmill, waiting to retire or really good at what they do but you’re afraid to lose them. There’s a little bit of phased retirement, which is something that the industry really needs to look at, so that you take someone who is going to retire in two years, and in the next six months, they’re (working) four days per week, and it decreases to three, two and one day.
This feature is from Insurance Business Canada's July Issue #2.3. To read more, please download the issue by clicking the link.
