A Matter of Demographics

It’s a good news/not-so-good news story being told by the institute’s new research report, A Demographic Analysis of the P&C Insurance Industry in Canada 2012-2022.

First for the good news: substantial recruitment activity took place between 2007 and 2012, this despite the degree of economic turbulence in Canada since 2008. In addition, the level of recruitment appears to have compensated for the level of retirement witnessed by the industry to date.

Now for the not-so-good news: The industry has not seen the level of retirement anticipated so, going forward, the impact of retirement will increase substantially. The level of recruitment (and retention) will also need to increase substantially.

“When the first census was released in 2008, there was quite a bit to say about the high proportion of the boomer cohort in the industry (almost half), the low entry-to-exit ratios and the need for more targeted recruitment,” says Margaret Parent, director of the Insurance Institute of Canada’s Professionals’ Division, and project lead for the demographic research studies. “Since the first census five years ago, the research reports have shone a light on the industry’s labour issues, the employers have taken action, and Career Connections’ awareness and engagement strategies have increased and extended. As a result, I am pleased to see that change (i.e. recruitment) is evident.”

RECRUITMENT INCREASED

The most profound change between 2007 and 2012 can be seen in an analysis of the boom, bust and echo cohorts. As demonstrated by Chart II-4, when industry age structure is considered, the share of the echo cohort1 – ages 17 to 32 in 2012 – has increased from 12% in 2007 to 27% in 2012, at the expense of the share of the boomer cohort – ages 46 to 65 in 2012 – which decreased from 49% to 37% over that timeframe.

Chart II-4

“As a result, in 2012 the workforce of the property and casualty insurance industry is both younger and more aligned with the age structure of Canada’s labour force than was the case in 2007,” notes Richard Loreto, president of R.A.L. Consulting Ltd., and author of the research report. “This increase in the echo cohort is across every province, every region, every company type and size, as well as every occupational category (except management),” Loreto says.

“The rise in the share of the echo cohort is an indicator of substantial recruitment activity,” Loreto states in the report. “The data from 20 companies who participated in both the 2007 and 2012 census clearly indicate that they have grown their collective workforce. Full-time employees working in the targeted occupations for these companies have increased by 40%.”

RECRUITMENT MADE EASIER

In the survey of human resource (HR) professionals, respondents indicated that on average, recruiting for all insurance roles is somewhat difficult. Some roles, such as customer service and technical support positions in claims, underwriting and sales, are perceived as easier to recruit.

These roles tend to be entry-level roles and recruiting is made easier by employee referrals, competitive compensation levels, being an employer of choice and accommodating work-life balance issues.

Aligning nicely with HR’s perspectives on employee referrals is the finding that 44% of current employees indicated they got their first job in insurance as a result of a direct referral from a family or friend working in the industry (See Chart IV-11).

Chart IV-11

RECRUITMENT MADE DIFFICULT

Roles that are more difficult, and more urgent, to recruit include actuary, accident benefits adjuster and claims adjuster/examiner positions. These roles tend to be experienced roles and recruiting is made difficult by too few qualified internal and external candidates, uncompetitive compensation levels, and failing to accommodate work-life balance issues.

More HR professionals report (54% in 2012 compared to 21% in 2007) that accommodating work-life balance issues is an important factor impacting recruitment.

IMPORTANT TO RETAIN

The results of the employee survey show job satisfaction is high among current employees – 89% are either somewhat or very satisfied. That satisfaction extends to career prospects, at both the company and industry levels, and with regard to specific aspects of work (for example, compensation).

That being said, the research illustrates that in both 2009 and 2012, approximately one-third of respondents indicated they intend to leave their current employer within the next five years. Moreover, of those stating an intention to leave – for a higher salary, to pursue career advancement within the industry or to retire – one-half intend to leave within the next two years (See Chart IV-14).

Chart IV-14

IMPACT OF RETIREMENTS TO 2022

The census data demonstrate the gradual aging of the industry’s workforce over the last five years. Although the median age has remained stable at 41 years, the entry-to-exit ratio for those 25 and younger compared to those 55 and older has fallen from 0.53 to 0.42. The ratio of employees 35 and under to 55 and over has declined from 3.68 to 2.61.

“This means that for every 10 employees over the age of 55, the industry was recruiting five, now only four, employees under the age of 25,” Parent explains. “And if we presume that over the next 10 years replacing retiring managers would come from within, then the proportion of under-35 employees should be increasing, not decreasing.”

Add to this mix that employees in the insurance industry retire younger than the general Canadian labour market, by two or three years. “Between 2007 and 2012, the median age of retirement for men working in the p&c insurance industry was 60; for women, the median age was 59,” Loreto notes in the report. “The industry remains in the vanguard of the early retirement trend.”

The report projects a potential maximum decrease of 28% nationally in the industry’s workforce base by 2022 as a result of demographic factors. In terms of the industry’s management ranks, the potential maximum is a 43% reduction over the next 10 years, with the greatest hit affecting the senior management level. And these projections are three percentage points higher than in 2007.

To date, the “substantial recruitment activity has allowed the industry to, at best, stabilize the aging trend and counter the impact of retirement,” Loreto writes.

“However, in 10 years, the boomer cohort will all be older than 55 and, therefore, the impact of retirement should increase substantially. Going forward, it will be imperative to recruit (and retain) at a level that mitigates the potentially adverse impacts of demographic trends, in terms of both supply and demand pressures,” the report adds.

The report is the third demographic research study published by the Insurance Institute of Canada on behalf of the industry and authored by Richard Loreto.

“We know that the first two studies have provided information that was of value to our stakeholders and the industry,” says Peter Hohman, president and CEO of the Insurance Institute of Canada. “We know it has informed the initiatives of the Institute’s Career Connections program, the FCIP program and other professional development offerings. We anticipate that this third st
udy will provide further information for employers’ recruitment and retention strategies and that collectively, these demographic studies will help to address their future human resource requirements,” Hohman adds.

Copies of the report are available on the Institute’s website.

1 David K. Foot with Daniel Stoffman, Boom, Bust & Echo: Profiting From the Demographic Shift in the 21st Century (Toronto: Stoddart Publishing Co. Limited, 2000).