May 1, 2012 by Gerald Legrove
The insurance industry has changed dramatically in the last 20 years. The advent of social media, an increase in the frequency and severity of catastrophic events, and the contraction of the marketplace are just a few of the new challenges that the industry faces. And that means that the leaders of today’s insurance organizations—whether insurers, reinsurers or brokerages—require different skills than in the past.
That’s the conclusion of a research paper titled “Paving Success in the Insurance Industry: Conversations on Trends, Skills, and the Tools Insurance Leaders Need to Draw Upon for Success,” co-authored by MBA graduates Mila Banerjee and Amit Bhatia, and Gerald Legrove, president of DGA Careers. In the course of their research, the authors interviewed 14 Canadian industry leaders to find out what it takes to be a successful leader in today’s insurance world.
The interviewees resoundingly said that a generalist background, with a variety of experiences and roles, helps to shape an overall understanding that is critical to the success of the business. Individuals who focus on one area of the industry and rise through the ranks to lead the company are becoming increasingly rare. Instead, today’s leaders are hiring experts in each business area while leaders focus on strategy and vision.
Through the interviews and other research, the authors concluded that there are five main challenges shaping the insurance industry today: talent gap, differing workplace needs across generations, speed of change, risk management, and ethics. By honing the skill sets that each one demands, leaders can better meet and manage these challenges.
1) Talent Gap
While all businesses must cope with an aging workforce, insurance organizations report having a higher number of workers 55-plus years of age compared to other financial-services sectors, such as banking and investment.
According to the 2007 study “Talent Matters,” produced by Deloitte on behalf of the Toronto Financial Services Alliance, there is “a need for new strategies to grow the shrinking talent pool, mitigate the loss of critical skills, close the widening leadership and skills gap, better integrate new immigrants, capture full value from retirees, and last but not least, meet the needs of the next-generation workforce.”
Not only must new talent be attracted, but succession planning needs to take place to ensure that the organization can pass on the skills, experience, and institutional nuances while integrating new talent with long-term employees. Therefore, a focus on high-level succession planning will become an important priority for leaders. Succession planning should identify the organizational gaps, the skills present in existing talent, and developmental or staffing requirements to fill future needs and existing gaps in the organization.
2) Workplace Needs – Generational Differences
The insurance industry is dealing with four different generations of employees—Traditionalists, Baby Boomers, Generation X, and Generation Y—each of which has different needs and desires.
In order to maximize company productivity, employee potential, and employee satisfaction, organizations need to take a flexible approach to working with different generations. As more Gen Y employees enter the ranks and interact with the Baby Boomers and Gen X employees, the ability to understand generational types will become critical for success.
After all, Gen Y employees will soon comprise the second-highest percentage of the workforce after the Baby Boomers, and have distinctly different expectations than other groups. For this reason, leaders are particularly thoughtful around the impact of this cohort. A Deloitte report titled “Generational talent management for insurers” notes that Generation Y employees need:
Consequently, today’s leaders will need an understanding of human resources, along with an ability to adapt to varying needs, and to relate and communicate differently.
3) Speed of Change
Given the fast-paced global environment, insurance executives are finding it difficult to keep up with the rate of change.
For example, social media has become a large part of personal and business information exchange in the last 10 years, and Canadians are among the highest users of these forms of communication.
In a 2010 PricewaterhouseCoopers LLP report titled “Social media is fuelling the reinvention of the customer experience” the authors note that as platforms like Twitter, Facebook, and LinkedIn continue to thrive in a social setting, the insurance industry is working to understand how to leverage the changing trends in the information age to stay connected with customers, the public and potential or existing employees. Many leaders are particularly challenged by the difficulties that social media poses from a regulatory and customer-service perspective.
The increasing frequency and severity of catastrophes has been another significant challenge. No matter what the cause or source, insurance leaders see differences in the claims that are occurring—for example, the shift of the most common insurance risk from fire to water damage. The ability to recognize and respond quickly to these shifts becomes an important priority for delivering profitability and superior customer service.
Leaders need to be open to change, to be able to adapt to it, and to have a vision for the future. Understanding how they themselves deal with change, as well as how they need to lead and encourage change, is a pivotal skill set that will be used repeatedly in a dynamic environment.
4) Risk Management
Risk management is an area of the insurance industry that has been heating up as insurance leaders allocate more attention and resources to it. Executives are under increasing pressure to manage risk and grow the top line while maintaining or improving profitability and sustainability.
The scope and magnitude of natural disasters have caused an important shift, both in how policies are written and the pricing structure needed to safely assume the risk associated with the policy.
Many leaders in our study also spoke about the increasing competition that is driving down margins as more and more companies, both local and international, enter the same insurance sub-markets. The pressure on revenue growth must be balanced against the risk that the company is taking on with the new policies it is underwriting.
Historically, it was often the actuaries who would rise to the helm of the company because of their strong analytical and technical abilities for risk assessment. And while technical competence, solid education, and analytical skills are still important, leaders in today’s environment must have emotional intelligence as well. Specifically, when leaders are contemplating the changing landscape within risk, it is also important to understand what incentives and motivations are at play for individuals in the organization to assume more or less risk.
Privacy concerns, digital media, the financial crisis, government regulatory changes, diversity in the workplace, incidents of claims fraud, and increasing public scrutiny have all posed a greater challenge to leaders to maintain consistent and strong ethical practices across organizations. Employees, stakeholders, and customers are all seeking organizations with strong values and the ability to do the right thing.
As one leader put it, “It is especially important in the insurance industry to have integrity. Our products are a promise for the future. Your customers have to trust you.”
While one often thinks of major scandals when ethics are discussed, it is the day-to-day commitment to integrity that matters to employees, shareholders, and customers.
The leaders we interviewed identified trust, integrity, and the ability to communicate effectively as three key qualities in leading day to day within an organization and in establishing values and a presence with the public, investors, and customers. These qualities help reinforce ethical obligations and actions that are paramount in handling the challenges and changes that are affecting the insurance industry and business today.
Today’s leaders must not only keep abreast of industry trends, they must also consistently evaluate and re-evaluate the collective skills they need to guide their team or company to success. Based on our findings, leaders that focus on the above five areas stand the best chance of getting there.
Gerald Legrove is president of DGA Careers, an executive recruitment firm serving the Canadian P&C industry. To obtain a copy of the research paper, please contact Gerald Legrove (Gerald@dgacareers.com) in Toronto or Tom Rivers (Tom@dgacareers.com) in Vancouver.
Copyright 2012 Rogers Publishing Ltd. This article first appeared in the March 2012 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.