September 26, 2018 by Margaret Parent, Director, Professionals’ Division, The Insurance Institute of Canada
The number of older and retiring managers in insurance is one key factor contributing to the looming management and leadership gap our industry faces. The other factor is that new and different leadership skills—such as creativity, flexibility and adaptability—are needed in disruptive times such as these.
Management roles impacted by retirements
With a median retirement age of 60 in the industry, the boomer cohort—which currently represents 27% of the industry—will likely be retired by 2027. That’s 33,750 people exiting the industry’s workforce of 125,000, with more than half projected to retire before 2022.
When we look at people retiring from management roles in the industry, our research indicates that 35% of all managers will likely retire by 2027.
Senior management roles will take the biggest hit: 52% of senior managers will retire by 2027. In the past, new senior management has been supplied by a direct pipeline of qualified candidates from middle and front-line management. However, these ranks will be significantly depleted as well, with 33% of middle managers and 28% of front-line managers also due to retire by 2027.
While it’s not surprising that most of our management roles have traditionally been filled by mature workers and those with the longest tenures, our industry’s managers are actually older than the managers in other industries.
For example, 75% of P&C senior managers are 45 or older, which is much higher than that of the overall workforce (70%), the financial services sector as a whole (69%) and the professional services sector (62%). The story is similar at other management levels: 56% of P&C middle managers are 45 or older, which is higher than the overall workforce (52%), as well as the financial services (48%) and professional services (45%) sectors.
“These gaps have been consistent over time, suggesting there may be different cultures among these sectors in terms of how much experience is required before a person can be promoted into different management roles,” writes Michael Burt, executive director of industrial economic trends with the Conference Board of Canada and author of the report A Changing Workforce: Implications of Technological Disruption for the Insurance Industry in Canada.
Leadership competencies are changing
“In a world that is being redefined by a transition to digital, organizations must not only be willing to adapt to change; they must also be responsive to perpetual change,” Burt writes. “Creating and supporting a culture of adaptability requires new skills and practices from the industry’s managers and leaders.”
Leaders of the past may have been chosen based on experience, tenure, performance and/or subject matter expertise. Leaders of the future will need to be chosen earlier in their careers based on their capacity for critical thinking and strategic decision-making.
As insurance organizations look to adopt data-centric and customer-centric approaches across all areas of their businesses, managers and leaders will be required to make big, decisive and strategic decisions—often in an environment of risk.
Organizations will need to take a multipronged approach to mitigate leadership and management gaps:
(1) Putting greater emphasis on succession planning
Our research shows that succession planning has been most effective when targeting senior management positions, but is not as prevalent in regards to middle and front-line management positions. The high numbers of retirements projected at the middle and front-line management levels will complicate the traditional management pipeline.
(2) Identifying and developing leadership potential sooner
Our research suggests that the industry would do well to adopt more contemporary practices for promoting people into management. Rather than identifying potential managers who are next in line for a promotion based on tenure and technical expertise, it may be necessary to identify potential leadership candidates from groups of workers who are underrepresented in management roles, such as:
(3) Hiring in-demand skills
Our research shows that leadership and management skills:
The high demand to replace managers, combined with the changing skill requirements for managers and leaders, identifies the top challenges for organizations in the near future as they look to create a culture of adaptability.
These findings on key challenges for the industry’s management and leadership roles represent just some of the many findings to come from the Insurance Institute of Canada’s decade of demographic research study on the industry’s workforce. Two Institute reports, written by the Conference Board of Canada, are to be published in September 2018: Demographics of the P&C Insurance Industry in Canada and A Changing Workforce: Implications of Technological Disruption in the P&C Insurance Industry in Canada. More information is available at insuranceinstitute.ca/research.
Copyright © 2018 Transcontinental Media G.P. This article first appeared in the August edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.