The insurance industry's executive ranks have become top-heavy on the age scale, and a potential wave of retirements could leave insurers with a dearth of experience at the controls.
Studies have for years forecast a wave of retirements and a shortfall in leadership experience to fill the void, and recent surveys suggest that a change in the hiring and recruiting climate is real.
Talent crunch: Is the future now?
The job market for insurance executive talent has become especially tight. A study released this year by Aon PLC and The Jacobson Group, which specializes in insurance recruiting, showed that the industry is encountering more difficulties in filling leadership positions than it has in a decade, Gregory Jacobson, co-CEO of The Jacobson Group, said in an interview.
The insurance industry's unemployment rate of 1.7% is less than half the national rate of 3.6%. On an industrywide basis, the Jacobson-Aon study found that jobs have become harder to fill in eight of 12 industry categories it surveys and that hiring is particularly tough in technology, actuarial, underwriting and product management. Executives were among the categories rated the most difficult to recruit.
One reason behind the deficit of leadership talent is simple demographics, according to Jacobson. The population of Generation Xers succeeding retiring baby boomers is numerically smaller, resulting in a talent scarcity taking hold during a time of steady job growth.
To address the shortage, companies will need to adjust their methods to fill executive roles, said Roger Lear, a partner at the talent search company Greatinsurancejobs.com. The normal career trajectory into management comes with a 20-year horizon, Lear said in an interview. With the existing talent crunch, companies might need to more quickly identify those with management capability and cut that time in half.
"They're going to have to ... take those that have the abilities, knowledge and the aptitude and fast-track them into these management jobs," Lear said.
Insurance companies should open up paths to advancement by allowing cross-training among career tracks to allow people to move more fluidly among underwriting, claims, accounting, finance and other disciplines, Jacobson said.
"Companies who are giving a lot of thought to this are saying, 'We want to break down the silos so we can teach people different aspects of the business so they can be broad-based leaders,'" he said.
Another aspect of what he calls "cross-functional exposure" that could help with the management transition would be to jettison the bias against hiring leaders from outside the industry. The leadership could benefit from some cross-pollination, Jacobson said.
A sampling of executive opinions
The topic of filling an expanding "generation gap" in leadership talent was a familiar issue among a group of executives who were part of an October panel discussion focusing on reinsurance.
Leadership has been going on like "good rock bands," David Priebe, chairman of Guy Carpenter & Co. LLC, said during the American Property Casualty Insurance Association's annual meeting. More than half of reinsurance underwriting and brokerage professionals will be eligible to retire within the next five years, Priebe pointed out, though he is not personally ready to do so.
Others are prepared to ease into retirement, but do not want to stop working altogether, said Mike Mulray, chief underwriting officer for Everest Re Group Ltd. That group of executives could help with transitions.
"Somebody who wants to work a few hours a week a few days a month [could be] incredibly valuable," Mulray said. His company has spent more resources lately on talent development and recruiting than it has in the past, Mulray said.
RenaissanceRe Holdings Ltd. has sought to accelerate leadership development by exposing more of its junior executives to more aspects of the operations, said Chief Underwriting Officer David Marra.
"There's a lot of experience in the company and lending experiential education to the younger talent is really key," he said.
Recruiting the next generation of leaders
On the other end of the age spectrum, the University of Illinois hosts two programs with industry connections to engage college students who might be interested in insurance or other risk-management jobs. One of these is the Office of Risk Management and Insurance Research, headed by 25-year industry veteran Lynne McChristian.
The center connects students with industry careers, which most know nothing about if they do not have a family member in one, McChristian said in an interview. Like so many in the business, McChristian did not choose an insurance profession at a young age, but "fell into it" by chance after working in another part of the workforce.
One of the best ways to attract undergraduates to the industry is to help students see paths to career development once they are introduced to insurance.
"In the college environment, we can help students create reasonable expectations about how quickly they can climb up the ladder, and [about] the expectations they must meet to achieve," McChristian said.
Any familiarity most people have with the industry is usually associated with sales, said David Hays, who leads the Axis Research Center, a campus organization at Illinois that connects the research arm of the industry with faculty and student interns. Students should know that nearly every area of interest lends itself to an insurance application, Hays said in an interview.
"There are so many disciplines the insurance industry must call upon to have the expertise to settle claims, underwrite risk and price risk," Hays said.
One potential draw for millennials who might have watched their parents lose so much during the Great Recession is an industry whose professional workforce has proved to be mostly immune to downturns, said Lear, the talent search partner.
"Guess where they weren't being cut? They weren't being cut in the insurance industry," Lear said. "People need to know that."