Focused Insights: War For Talent: Attracting and Retaining the Next Generation Vol IV, Issue 2
Hurricanes or cyberattacks aren’t keeping insurance brokerage executives up at night. The main source of stress is actually a talent shortage in the insurance brokerage industry.
A big part of the issue is the insurance industry’s image, which can be perceived as boring or old-fashioned. For those seeking a career that offers advancement opportunities, community impact, an innovative culture and a work-life balance – the insurance industry should rise to the top of their list – but it doesn’t.
When firms can’t attract new talent, it creates a ripple effect across the business. Without a strategy to hire the best talent, firms will likely have a hard time growing and competing. Couple that with the increased population of insurance professionals nearing retirement and many firms are left scrambling to handle current client needs while also looking to drive new business. In the insurance industry’s “war for talent,” here’s how to find, attract, and retain the best people – to help a firm’s growth strategy.
Strategies for finding and attracting the best talent
All companies are searching for the best and brightest employees, meaning insurance firms aren’t just competing with other insurance employers, but also other popular industries, such as tech, healthcare and non-profits. The next generation of leaders, particularly millennials (currently age 28-43), are highly sought after as they have now gained professional experience, are very tech-savvy, and can seamlessly learn the latest digital solutions, systems, and tools.
Here are some ways firms can attract new talent:
Don’t make open positions only about “insurance.” While you don’t want to hide the fact that the role is for an insurance firm, emphasize other aspects of the opportunity such as “marketing” or “finance” or “operations” or “human resources.” Articulate how the company improves lives or solves problems.
Hire talent based on skill sets, not just insurance industry experience. High-growth firms tend to hire more employees who are newer to the industry, which not only fosters growth, but also drives innovation and ensures the perpetuation of talent as people advance or retire. Particularly if the firm is looking to grow in a new industry, for example, the manufacturing space, find talent in that space who already knows the lingo, relationships, and concepts.
Get involved with local universities and career fairs to attract young talent. Especially consider career events aimed at women — who represent about 59% of the insurance workforce1, but are still underrepresented for senior-level roles. Promote internship opportunities, where mentorship programs can have the most impact in creating a career impression. Also highlight career advancement opportunities and innovative projects.
Promote external community involvement and internal community groups. Highlight the ways your company benefits or serves the broader community. Feature any Employee Resource Groups (ERGs), which help create more diverse and inclusive work environments.
Understand and focus on the elements that motivate people from different industries and generations and include them in the firm’s talent strategy.
Why does WASA matter?
Attracting younger employees is an important part of any growing firm’s talent strategy. Without layers of generational talent, a firm has no chance to perpetuate knowledge and cultivate leaders. While the insurance industry is challenged in attracting younger talent, it’s not impossible. In fact, the top performing firms are the ones that are able to keep their Weighted Average Shareholder Age (WASA) down by ten years, versus the average firm. According to MarshBerry’s proprietary financial management system, Perspectives for High Performance (PHP), the Best 25% of firms (based on their financial performance, specifically organic growth) have a WASA of 43.2 years old, compared to the average firm of 53.9 years old.
Firms should examine their WASA, which shows the average age of shareholders versus the percentage of stock they own. When WASA is higher, it may indicate the need to perpetuate ownership or start investing time and effort into strategic equity succession planning.
This doesn’t necessarily mean younger is better – but reducing WASA opens opportunities to explore new options, like developing leadership or attracting strategic partners. A lower WASA indicates a firm is identifying its next generation of leaders, ensuring those folks have an opportunity to own a piece of the business, and increasing the likelihood of retaining top talent.
Strategies for retaining top talent
Once a business has attracted the best people, the next step is to keep them for the long-term. Here are some ways firms can keep the best talent once they find it:
Create mentorship and onboarding programs. Talented people are often ambitious and seek personal and professional growth to excel in their roles. Cultivate top performers by assigning mentors to provide guidance and share insights, use personalized development plans to accelerate their learning, and offer challenges to test their abilities. For individuals early in their careers, or new to the insurance industry, a dedicated onboarding program is not a mere formality, but a critical driver of success.
Establish KPIs and develop future leaders. Measuring success and celebrating wins keeps people engaged and employed because it shows how their work contributes to the company’s success. Transparency is a very attractive feature in an employer, so setting realistic but ambitious key performance indicators (KPIs) for producers, service staff, and support teams, will drive motivation and engagement. Research indicates that companies with strong goal/accountability cultures see an increase in revenue growth, have higher average annual returns, and boast highly engaged employees. Those employees in turn can generate a 202% increase in performance.2
Design the right commission split for producers. A well-designed compensation strategy can have a huge impact on hiring and retention, culture, and the overall performance of an insurance brokerage. Commission split best practices for producers are an essential part of this method as they enable attractive pay without damaging the business’s bottom line. Paying producers too high a renewal commission will only lead to challenges. Firms that offer 40% commissions on new business and 40% commissions on renewal business (40/40 split) are paying a hefty commission on renewals that should require less effort from the producer. In addition, this prevents them from investing in strong service individuals that are best suited to manage the book. Consequently, those firms aren’t growing at the same rate as top performing firms. MarshBerry recommends pushing the commission split difference between new and renewal business closer to 15–20%. Firms that adapt this strategy can reinvest in areas such as service staff, technology, or new producers.
Strategies for managing performance and growing the business
Over time, retaining the best people will enhance profitability and strengthen a company’s ability to reach its growth goals. But this doesn’t occur without obstacles and pain points. Here are some strategies for ensuring the best talent is given the best chance for success:
- Shift non-producing producers to account executive roles. For producers who are not meeting production goals, consider moving them into more appropriate and effective roles. Insurance leaders have moved underperforming producers into roles like Account Executive (AE), where new business isn’t the focus but other skills such as industry experience, client service, or product knowledge can be put to better use. AEs are key to client retention and strong client relationships and are typically entrusted with sophisticated relationship-management responsibilities. High-growth firms incentivize and motivate AEs to cross-sell accounts and nurture relationships that help their firms achieve growth goals faster.
- Reinvest in unvalidated producers. Investing in greener producers ensures that books of business will be seamlessly transitioned as senior producers retire. A firm’s Net Unvalidated Producer Pay (NUPP) measures investment in producers that haven’t yet built up a significant book of business. The NUPP metric is calculated by taking the total compensation of all unvalidated producers, subtracting the “validated” compensation they would earn based on their current book of business, and then dividing that difference by the firm’s net revenue. This gives a percentage that represents the firm’s investment in new producer talent. As seen in the chart below, the Best 25% of firms have a NUPP percentage that’s almost double the average firm.
- Stretch producer goals with minimum account thresholds. Companies striving to grow by double digits each year should establish a minimum account threshold below which producers are not paid renewal commission. This threshold sets a standard for the type/size of account required to do business with the producer. These vary from producer to producer and can be based on book size, location, specialty, or other factors. Establishing thresholds can help producers better understand where their time and resources are being used and how to make the most efficient use of those. If implemented properly, a minimum account threshold will drive producer book growth and leave them greater capacity to keep fishing “upstream” for new business. This is vital for producers to succeed and firms to grow.
- Maximize growth with a Small Business Unit (SBU). SBUs are another strategy for maximizing talent and driving profitability. SBUs are specialized departments or divisions within an insurance brokerage that focus on serving the insurance needs of small businesses: those that have a relatively low number of employees, minimal annual revenue, and limited assets compared to larger enterprises. While it may sound counterproductive initially, developing an SBU can help tenured producers focus on larger and more complicated accounts, thus boosting growth, while also retaining clients and protecting relationships. In addition, an SBU is another venue to sell additional insurance products to established clients. The goal should be to build an SBU that’s profitable in design with potential for further growth. Since most of today’s insurance broker landscape has neglected the SBU strategy, smaller clients are taking notice and gravitating towards those who offer an SBU broker model.
Each of these management tactics is crafted to boost sales, properly reward hard-working, talented staff, and prepare for future challenges. Everything from building the team to motivating and coaching to rewarding top performers should be designed to move the organization towards a vision. A company’s success hinges on the caliber of its workforce, but it takes a smart strategy to get them there. The latest technology, a strong pipeline, or slick marketing won’t achieve much without the right people in place.
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