Human Capacity

Human capacity issues such as recruitment, succession planning, education and training are at the forefront of industry concerns today. The need to attract new entrants to the insurance industry has become a resonant call from the industry’s CEOs and human resource professionals.

These concerns are well-founded: they are confirmed in the findings of a recently- released demographic research report conducted by The Insurance Institute of Canada on behalf of the industry.

Our primary objective in conducting this research is to add value to the industry by bringing much-needed information regarding future hiring needs, training and development requirements and potential leadership gaps. We know the industry will benefit from original and unique data representing a snapshot of the industry today, some predictions regarding human resource capacity in the industry in the future, as well as recommendations for addressing the identified needs.

We are pleased with the scope of the report. We are confident it provides something the industry has not had before and desperately needs: a comprehensive and credible understanding of the human

capacity needs of the property and casualty insurance industry now and for the future.

ABOUT THE STUDY

To conduct the research study, The Insurance Institute commissioned Dr. Richard Loreto, one of the foremost experts in Canada on applying demographics to labour force analysis. He came highly recommended by the renowned author and demographer David Foot. In authoring the report, Loreto used Foot’s Boom, Bust and Echo cohort analysis and developed retirement projections using industry-supplied data to identify the future impacts of demographic change on the industry’s core occupations. [Please see Chart below.]

The research study consisted of two phases: the first involved conducting a “census” of industry employers; the second included a survey of human resources professionals.

For the census data collection, we asked employers and the four largest provincial regulators to provide primary demographic data on their employees and their licensees, respectively, during the period between August and October 2007.

Forty-three insurance and reinsurance companies, adjusting firms and brokerage firms participated in the study. Also, four insurance councils/regulators provided demographic data on their membership. In the end, the response included nearly 91,000 records (representing 28,300 records of active employees within organizations, 12,500 terminated records and 50,000 records from four regulatory bodies across the country).

Due to the high number of records received, the data analysis is highly credible and representative. For instance, the industry data compare to the Statistics Canada data from the Labour Force Survey and 2001 Census. Also, the data are verifiable when company data are compared with data from regulatory bodies.

Subsequently, a survey of human resource professionals in the insurance industry was conducted during the period November to December 2007. This survey assessed perceptions about recruitment and retention issues. Forty-four (44) responses were received from across the country.

“In my long experience of doing this kind of research, I have never had a better data set to work with,” said Loreto, the principal of R. A. L. Consulting Limited and author of the research. “For a first effort, the response from the industry’s stakeholders was fantastic. As a result, the quality of the analysis is extremely high. In addition, this project positions the industry to carry out effective human resource planning both now and in the future.”

The final report contains in-depth and comparative analysis, identifies the variance between the human resources professionals’ perceptions and the realities of the industry’s demographic composition and projects the anticipated demographic change in the industry from 2007 to 2017. The report then identifies strategic implications for the industry based on the demographic trends and makes appropriate recommendations regarding the management of demographic change.

To our knowledge, this type of industry- wide research has never been done before. To now have real, industry-specific demographic data — both to confirm what we believed anecdotally, and to project future implications of the demographic imbalances in the industry’s workforce — is significant and timely.

KEY HIGHLIGHTS

For the purposes of this article, we’ve compressed the research findings contained in the full report to these 10 key points:

Imbalances Need Balancing

The insurance industry has a number of imbalances in the age, gender, geographic and occupational composition of its work force. Specifically:

• General concerns about the aging labour force in Canada are mirrored in the industry-specific data. With a median age of 41, the industry’s work force is aging in lock step with Canada’s labour force. This suggests the insurance industry is not a young work force and will continue to age (Canada’s labour force is projected to reach a median age of 44 within the next 10 years).

• Although the median age for the industry work force is in step with the rest of the country, the industry’s proportion of people from the Baby Boomer generation (born between 1946 and 1964) is not. The insurance industry’s share of Boomers is larger than in the labour force as a whole (in 2007, 49% of people working in the insurance industry are between 41 to 60; compared to 45% percent in the rest of the general population).

• Further, in certain key occupations — brokers and adjusters, for example — median ages are significantly higher than the rest of the industry and the general labour force.

• Not only is the industry’s work force aging, but industry employees retire younger (by two to three years).

• The over-representation of females in the industry’s core labour force age groups leaves the industry dependent on workers who constitute less than 50% of the entire labour force and who have lower participation rates. The industry’s dependence on female workers may be a problem as competition for workers heats up over the next 10 years. A similar concern exists with regard to the situation where males are over-represented in core labour market age groups. The report acknowledges that both recruitment and retention become strategic challenges.

• The share of boomers is highest in Western provinces (except Alberta); small towns and rural areas; the smallest companies, such as mutual insurers, but also the Crown Corporations; and the management group (where 70% are boomers).

Incoming Will Not Replace the Outgoing

There are not enough entrants to replace those exiting the industry’s labour force. Compared to the overall labour force, and compared to the minimal standard that there should be one person entering the work force for every worker who can retire, the industry’s entry-to-exit ratios are very low. Furthermore, they have been in a pattern of steady decline for some time. Using the yardstick of the entry-to-exit ratio to measure the impact of work force aging, the report indicates the most problematic areas are Western Canada, the small towns and rural areas, companies with fewer than 100 employees, mutual companies and Crown corporations. From an occupational perspective, all occupations (except actuaries and sales-and-service employees) are well below one.

Retirement Projections Give Reason for Pause

Retirement projections for the industry indicate 25% of the current labour force could retire by 2017. In B. C., it’s 38%. In Crown corporations, it’s 39%. For the occupational category of management (all levels of current managers) 40% could retire by 2017. The majority of those eligible to retire will do so between 2012 and 2017.

L
eadership Void Looms

Assuming the under-45 age group is the immediate feeder group to management, there is less than one worker under the age of 45 for every manager currently in the industry’s work force. The management cadre is the group that will be affected the most by demographic change. Existing middle and other managers are targeted for moving up. Non-managers are targeted to move in. Training and development explicitly focused at this group will be essential.

Key Roles at Risk

Regarding occupations, the research justifies the industry’s concerns about recruitment, retention and succession planning in the broker and adjuster communities. The data project high losses among the most experienced groups in these specific occupations. Data from the four regulators send an even stronger note of alarm than industry sample data. For example, within the adjusting community in B. C. and Alberta, a significant proportion of adjusters are in the upper echelons of the Boomer cohort, likely to retire within the next 10 years and leave substantial gaps in the adjusting ranks and leadership. For brokers and agents, the report demonstrates that one-third could retire within the next 10 years; significantly more could retire if they are in the management cadre. As the report indicates, the implications for recruitment, retention, and training and development are profound.

Key Sector at Risk

There is a “demographic divide” between the industry’s Crown corporation sector and private sector. Employees in the Crown sector are older across most occupational categories and retire earlier than their counterparts in private sector companies. The report emphasizes that over the next five to 10 years, recruitment issues will be paramount for three Crown corporations, as the impact of retirement hits home in highly competitive regional labour markets.

Targeted Recruitment Required In an aging work force situation, recruitment is critical. Not surprisingly, the report recommends recruitment efforts be targeted at the youth market and states “catching [the attention of the future labour force entrants] at the secondary and post-secondary school levels is imperative.” The research lends credence to the value of The Institute’s Career Connections program and calls for greater action and outreach in the future. [See Sidebar 2 for more information about the Career Connections program.]

The research report recommends further strategic sources for recruitment, namely immigrants, aboriginals (especially in Western Canada), and the younger occupational groups currently within the industry (e. g., sales and service employees). The report acknowledges these sources are not easily “mined;” substantial investment in training and development, above existing industry levels, would be required.

Retention Gets Greater Attention In an aging work force situation, retention is of equal importance to recruitment. The research report points to two retention “hot spots”: the Bust cohort (born between 1967 and 1979) and the Boomer cohort. Given that members of the Bust cohort are currently in their thirties, over the next 10 years they will migrate to their forties. However, the Bust cohort is smaller than the Boomer cohort. From a labour force perspective, this means not enough people in the Bust cohort are available to replace those currently in their forties — even if you factor in support from the immigrant population. For the insurance industry specifically, it is particularly worrisome the research shows that the Bust cohort appears to be a breeding ground for voluntary and non-voluntary exit at the company level (it was beyond the scope of the research to calculate precise exit rates form the industry). The report recommends that (a) employers revisit their retention policies and analyze the issue in relation to younger employees to both understand the reasons for exit and the incentives for staying; and (b) employers come to a better understanding of the aspirations of their current part-time employees as a prelude to assessing their suitability for full-time employment.

Reinvention, Rather Than Retirement, May Be the Solution

The aging and potential retirement of large numbers of Boomers brings a new retention issue to the fore. The industry, especially in the West, has a substantial Boomer component. By 2017, they will range in age from 51 to 70 in an industry in which 60% of employees retire by age 60 and 80% by age 65. In the aging labour force scenario, the report questions whether the industry can let its most experienced workers simply leave? The aging of the industry’s work force calls for human resource management policies that facilitate the “re-invention of the mature worker.”

Systematic Action Required

Projections for consumer spending indicate there will be above average growth for the products of the property and casualty insurance industry. This bodes well for the continued growth of the industry, but also substantiates the need to ensure the appropriate supply of human resources to satisfy the growth in demand. Ensuring sufficient human resources in the future will require greater attention and broader strategic efforts for the recruitment and retention of workers. The report recommends the need for industry-wide and company-specific systematic work force planning.

CONCLUSION

This research provides the industry with useful information and data not presently available on current and future recruitment and retention issues. The responsiveness of the industry netted a sizeable data sample that has ensured its credibility and the verification against Statistics Canada data and the four regulator data sets. Given the significance of the findings, the research will provide employers with sufficient impetus to develop — and lead time to implement — appropriate strategies to meet their future human resource requirements.

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The specific objectives of the research were to:

• Analyze statistical data on insurance industry occupations in Canada available from Statistics Canada.

• Develop demographic profiles of both current and terminated employees by occupation from data supplied by participating employers and provincial regulators within the property and casualty insurance industry.

• Analyze links between industry demographic profiles and current demographic profiles of Canada’s labour force at the provincial and national levels.

• Conduct a survey of the perceptions of senior human resources professionals within the industry on the issues and trends impacting the recruitment and retention of workers in the selected occupations.

• Identify the degree to which the perceptions of senior human resources professionals are consistent with the demographic realities of the industry.

• Project the change in the property and casualty insurance industry’s professional work force for the period from 2007 to 2017 that is attributable to demographic factors.

• On the basis of the research, identify the strategic implications of demographic trends for the property and casualty insurance industry’s professional work force and make appropriate recommendations regarding the management of demographic change.