The US unemployment rate fell to 3.5% in September 2022, matching July's 29-month low and remaining below market expectations of 3.7%, a sign overall labour market conditions in the world's largest economy remain tight. But how is the insurance market performing, are the issues we are seeing in the UK being replicated over the pond and how has their insurance market been effected by the pandemic?
As you would expect, the US lead the global insurance industry in premium volumes and employee numbers and its unemployment rate is 56% lower than the national unemployment rate. Experts estimate that by 2024 the US insurance industry will reach $2.6 trillion up from $1.6 trillion in 2019. *
Our recent work in the US has demonstrated that the insurance issues we are experiencing in the UK – lack of talent, compliance rigour, agile working = lack of decision makers – are the same in the US – an indication that the industry is being effected globally.
The War on Talent
The sheer lack of suitable talent and the highly competitive nature of acquiring it, appears to be a global problem. The US certainly have concerns over the ever increasing skills shortage and therefore mounting cost of labour.64% ** of US insurers are uneasy about the rising labour costs and the potential knock on effects on quality standards and customer experience. 48% believe these essentials will be affected by the scarcity of skills. **
Similar to the UK market, the US has a problem attracting millennials to the industry. This could be a concerning trend for the sector, particularly given that 75% of the global workforce are millennials and experts predict that 25% of insurance professionals are expected to retire in the next 3 years. How are these individuals going to be replaced? Organisations need to consider their attraction strategy, how will they attract new talent from outside of the sector and can existing employees be retrained or upskilled to reflect the changing requirements of the market?
Automation and AI, Changing the future of insurance.
Up to 25% *** of the insurance industry will be automated by 2025.40% *** of CIOs increased their AI spend in 2021. Significant statistics from an industry notorious for being behind the curve and as you would expect the US are right at the forefront of the industy's digital transformation.
The Robot Process Automation (RPA) market is snowballing with a compound Annual Growth Rate (CAGR) of 60.5% from 2014 and reached 5 million USD in 2020. RPA combined with AI can do wonders for the insurance business and it will be hugely impacted by these technologies, particularly in terms of employment. Automation will eliminate many existing jobs whilst at the same time creating new ones. Employees will have less emphasis on the more mundane repetitive tasks and will be able to focus more on providing a more personalised, improved customer experience.
Automation and AI will change the face of insurance with skill requirements changing in many roles. Businesses will need to understand how these changes can and will impact them and where automation can benefit in areas of Claims Processing, Underwriting and Pricing and Policy Management.
Diversity & Inclusion
The lack of suitable talent is a major issue, and the lack of a diverse candidate pool even more so.
The death of George Floyd back in 2020 bought racism into the spotlight and the National Association of Insurance Commissioners launched a special committee on Race and Insurance to examine levels of diversity in the industry. There is still a way to go when it comes to overall Diversity & Inclusion, approximately 23% **** of execs and officers of large US insurers that trade on the NASDAQ or NYSE are women. Businesses should be reviewing their succession plans and ensuring there is a woman in the mix for every role.
The insurance talent pipeline has also been a central topic of discussion, Tony Cotto, Director of Auto and Underwriting Policy at the National Association of Mutual Insurance Companies emphasised “the critical nature of a diverse culture in the long term success of the industry.”
There is still a long way to go, but the regulatory eye on diversity and businesses being forced to review their plans to increase diversity in leadership roles, should in turn help to increase the overall diverse talent pool.
Training & Development
It appears the US like the UK has been effected by the pandemic in terms of an organisation’s ability to adequately train and develop their staff remotely. Businesses are having to adapt their processes and change the way they offer training in order to legislate for a more agile workforce. There is still a problem for those new to the industry or indeed new employees where learning by osmosis pre pandemic was invaluable to the development and learning of these individuals. In the new virtual world, this type of learning poses a much greater challenge and one that organisations are still trying to address. There is a necessity to ensure that there is an office environment that is appealing to all employees and perhaps revised processes for new starters and the invaluable learning they get by listening to experienced individuals around them.
The US Insurance market – a driving force for the global insurance market
As the leader in the global insurance market, the US are likely to be at the forefront of the solutions set to tackle the challenges we face globally within the industry.
With additional investors entering the industry this has resulted in new businesses being set up that are able to offer LTIP/equity to individuals which traditionally hasn’t been offered at certain levels, making the sector more attractive, perhaps to potential new entrants.
Our Salary & Benefits Guide 2023, will include sector insight and commentary for the US market. Help us give our customers better market insight by telling us your thoughts and experiences on promoting your employer brand, salary budgets for the year ahead and much more in our Salary Survey.
*Jennifer Rudden, research expert, Finance, Real Estate & Insurance
*** Innovation Insider
**** S&P Global Market Intelligence