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Q&A: Insurers Group Warns Of ‘Retirement Cliff’ In U.S. Workforce

Emily Bollinger

A group that represents State Farm and other insurance companies is warning of a “retirement cliff” over the next 15 years that will leave over 400,000 open positions unfilled industrywide.

The prediction, from the National Association of Mutual Insurance Companies (NAMIC), was included in the U.S. Chamber of Commerce’s America Works Report this month. NAMIC says over the next 15 years, 50% of the current insurance workforce will retire. This will leave more than 400,000 open positions unfilled, while less than 25% of the industry is under the age of 35.

Neil Alldredge, NAMIC’s senior vice president of corporate affairs.
Neil Alldredge, NAMIC’s senior vice president of corporate affairs.

WGLT spoke with Neil Alldredge, NAMIC’s senior vice president of corporate affairs, about the prediction and what it could mean for the industry.

Q: What’s led to this retirement cliff? What are the factors that built up the cliff?

Alldredge: The insurance industry is sort of an interesting business from an employment perspective, in that there are a lot of people employed in the industry now that probably didn't think that they were going to really work for an insurance company 25 years ago.

A lot of people don't go to college and graduate and think, “What I really want to do is go work for an insurance company. That's at the top of my list.” But what happens is people get in this business, and they stay. Except for the technical fields, like actuarial science or those kinds of things, a lot of the other areas are sort of accidental in the way people get into it. But it's this interesting phenomenon, in that they get in the business, and then they stay for decades.

And that's what we have going on right now. Which is, we're at a cycle where, it's a little bit reflective of the dynamics in the country, where you have a lot of the sort of tail end of the baby boomer generation retiring. And we just have a lot of those people in the insurance industry. And so they have been in their business for a long time, they've worked in many cases 20 or 30 years for the same company, and they're at retirement age, or are nearly there.

We’re not an industry that is particularly transient. It's not one where maybe somebody comes and works for two years here and two years there. It's just not the dynamic in this industry. And so I think that's part of what we're seeing here with this talent gap, which is this phenomenon of a lot of retirees and not a lot of people in the pipeline behind them to fill these spots.

How disruptive could this be for insurers?

It's forcing some interesting questions. Of course, there's some investments in technology that have been made by insurers that make that transition a little easier. There are things we used to have people do that now maybe we can get done with technology.

But there also is simply an enormous focus in the industry to fill those spots. I've worked for a trade association representing insurance companies for 21 years. And I've never seen the kind of focus on recruitment that I've seen in the last couple of years by the industry. There is any number of college recruitment efforts going on at NAMIC. We have our own, we have a foundation that we created, that companies could donate to, to give scholarships to students in college, to attract them to the industry. So the industry is trying to address it.

It could be disruptive to operations. It's going to be most interesting to see what the result of the pandemic has on this as well, because insurers actually made the transition to remote work, in many cases, fairly seamlessly. And so one byproduct of that is, if you're a company that does business in the Midwest, or if you're in Southern Illinois, or Central Illinois, and you only do business in one state, you probably felt like when you're all bricks and mortar, everybody in one building, that you had a fairly limited geographic area in which to recruit people.

Well, that's all changed now. If you’ve gotten more flexibility with remote work, you can recruit someone anywhere to work for your company, no matter where you're located. And so that's probably not something we expected necessarily at the beginning of the pandemic, but it seems to be one of the byproducts of it. And insurers may be able to fill some of these needs as a result of it by using technology, more remote work, and the nuts and bolts of recruiting people to the industry, which is going on at a higher clip than it's ever been done before.

Your group says millennials have not shown significant interest in insurance careers. Why not?

The insurance industry probably doesn't rise to the top of the most interesting industry in the world, at least as people consider things they would like to do for their career. Perhaps they would like to go work for a software company or other cutting-edge kind of industries. And the insurance industry probably seems a little old fashioned, perhaps.

But I can assure your listeners that there are a myriad of great jobs. The companies that make up the insurance industry, which many are located near you there in Central Illinois, are wonderful companies to work for, filled with great people. They have a great purpose. They put people's lives back together again when they when they really need them. And it's a great place to work.

It's just not necessarily on the tip of everyone's tongue as the most interesting place to work, perhaps. And I think that's part of what you see. I would guess that phenomenon that was shown in the report about millennials probably was the same as it was in 1974. Younger people then probably didn't necessarily name the insurance industry as something that they had a lot of interest in. But as I mentioned, people tend to come to this industry, and when they get involved and they get employed by it, they stay. It's a strange, interesting industry that way.

What about retaining employees? What can insurers do to make sure there are still career paths across historical silos, so that people can grow, become managers, and stick around?

Insurers are looking at all kinds of different opportunities there. One thing that's interesting is insurance companies have become, in many respects, the systems that are needed to manage a modern-day property casualty insurance company. They’re very technology heavy. And so they have to create their own technologies. And so again, it's not a traditional thing that people might think of—they might think of accountants or attorneys, that those kinds of people that would be attracted to the industry. But most of the job growth is actually in the technology side of things.

And so insurers are really investing in those areas, that makes them more attractive to a different group of people. It gives employees new growth opportunities inside companies, not necessarily what many would think of as the traditional sort of “insurance career” possibilities. But virtually everything from marketing to communications to technology, along with the traditional financial expertise and underwriting and all of those kinds of expertise that are needed. The insurance companies are much more diverse in terms of their needs. And they're much more diverse and interested in recruiting diverse candidates than ever before.

Do you expect any significant movement on pay over the next 10-15 years as this retirement cliff comes? Will it raise pay for younger workers?

I think that's likely an outcome of this. I think you see that throughout the economy and not just our sector. But in many sectors, pay is certainly something that can attract people. And I would anticipate that to be the case for insurance companies as well.

Here at Illinois State University, we’ve got the Katie School of Insurance & Risk Management. Does the U.S. have enough insurance and risk management programs at colleges and universities?

Probably not. That is an area of growth that the industry is definitely trying to foster all around the country. There are certainly more risk management programs now at the university level than there were maybe 25 years ago. There's around 80 now around the country. There probably could be 150, in terms of being able to create the kind of pipeline we need.

Students that are in those programs have a wonderful opportunity on the back end when they graduate. They will have lots of options when it comes to employment and lots of possibilities when you look at potential employers in the industry. There is a great deal of interest by insurers to develop relationships with those students. The areas of internships and possible employment, part-time kinds of opportunities, all those things exist. So those students that are in those programs will have great opportunities to find employment once they're finished, but there could be certainly more risk management programs throughout the country. And I think you'll see that grow. We've seen several grow in the last decade or so, and certainly I would anticipate more of those to be created with the need that exists in the industry.

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Ryan Denham is the digital content director for WGLT.
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