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Labor shortage getting worse in insurance sector

State Farm corporate offices
Emily Bollinger
State Farm has instituted a face mask mandate at each of its hubs, including Bloomington.

Insurance industry consultants say there are record numbers of unfilled jobs in that part of the business sector.

Analyst Greg Jacobson, of the talent search firm The Jacobson Group, said there has been a talent shortage for a long time, but it is worse right now. He said the 10-year average unemployment rate in the insurance industry is only slightly above the current 2.5%.

“We are in an extreme situation in terms of not a lot of talent out there, but this is not really anything that is that unusual for our industry. Generally, we are keeping it in a range bound by 2-3%."

Insurance carrier total employment right now is about 1.56 million people, Jacobson said, down 85,000 from two years ago.

“This is not because insurance companies are not hiring people. They are trying to hire lots of people,” said Jacobson. “Companies cannot hire fast enough to replace the workers who are leaving.”

A broader finance sector survey showed a 10-year low in layoffs and a 10-year high in the number of people who are quitting. He said this is not too surprising given reports in other employment sectors about the "Great Resignation."

Retirements and people leaving the industry have driven the number of vacancies, said Jacobson. According to the latest industry survey, 14% of insurance companies reduced employment, but just 6% had planned to do so. Jacobson said that disparity backstops the retirement and industry exit figures.

Across the entire finance and insurance sector, there are 367,000 jobs available, according to the U.S. Bureau of Labor Statistics — 20% more than in 2019 before the pandemic.

A particular problem with hiring for companies like Bloomington-based State Farm is getting people to relocate.

"It makes some jobs not fillable," said Jacobson. "There are a lot of companies, because of the way the industry was formed as farm mutuals and things like that, that are in very small towns. It is very difficult to get people to move, even for CEO searches, to those smaller towns."

Insurance position categories most difficult to fill are in order: technology, actuarial, analytics, claims, and underwriting. Virtually all companies surveyed said those positions are more difficult to fill now than a year ago. The one exception is people in executive roles.

“We were never really in this category at that level in terms of total difficulty to fill positions in the industry. We’re at a peak right now,” said Jacobson.

Jeff Rieder, of the AON subsidiary The Ward Group, said that means existing employees are getting paid more, too, to prevent salary compression and inequity.

"This is causing more companies to have to make salary mid-year market adjustments as well. While many companies probably budgeted for only a 3.5% to 4% increase in merit, the reality is year over year, the trend is about 5%," said Rieder.

Ten years ago, average turnover in the insurance industry was about 8-9 %, both voluntary and involuntary. Now, it's in the 12-15% range as people retire or leave the industry and particularly with voluntary turnover spiking, said Rieder.

Retirements have had another impact as well — the level of experience with slight dips in the average age of a worker and length of tenure for the first time in the history of that particular survey.

And though there are no firm numbers, the analysts said this workers market has increased reports of so-called "ghost hires." Those are people who accept a job and then disappear and never show up for it.

“I only have anecdotal information, but there’s a lot of it. Yeah, that’s been a problem,” said Jacobson, adding most experienced employees who seek new jobs have no trouble.

“Companies have to move so fast (to) find the right person because virtually everybody who is actively looking or considering opportunities has multiple offers,” said Jacobson, noting there are many anecdotes of workers getting $30,000 to $40,000 raises.

“I was with a client earlier this week and what they’re saying is people are making job offers 15 minutes into the interviews particularly for these claims and underwriting positions, and even some stories they are making job offers off of resumes only in order to fill their needs,” said Rieder.

Jacobson cautioned against too much haste. He said it’s not just about putting money in front of somebody.

“This is about selling an opportunity, selling a relationship, selling a culture,” said Jacobson. And if you don’t take time to develop a relationship with a potential employee, that’s when you’re going to get those ghosting situations,” he said.

The varied employment pressures, Rieder said, are beginning to affect insurance industry customers.

“Seeing some slightly negative issues on (claims) servicing aspects. It’s also interesting to see that loss ratios have increased significantly in the first half of the year,” he said.

There have been challenges in the personal auto market and significant catastrophe activity, particularly in the Midwest that require more servicing activity and also could contribute to the loss ratio increase, said Rieder.

In an effort to compensate for the scarcity of full-time workers, Jacobson and Rider said insurance companies are turning increasingly to temporary workers.

There are about 35,000 temporary employees in the U.S. carrier market, said Jacobson, and 96% of insurance companies said they plan to use more temporary staff in the next 12 months.

WGLT Senior Reporter Charlie Schlenker has spent more than three award-winning decades in radio. He lives in Normal with his family.
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