Why is Employee Turnover High in the Insurance Industry in 2024?

2 June 2024

What’s Slowing Down the Insurance Sector?

Globally, the insurance market’s growth has been slow, especially when compared to overall economic growth rates. In recent times, insurance premiums globally are expected to increase at a modest compound annual growth rate of 2.4% between 2024 and 2027. This growth is significantly slower than the economic expansion in some regions, like India, where the insurance sector might see an average growth of 7.1% during the same period due to factors like a growing middle class and innovation​ (Business Standard)​​ (Deloitte United States)​.

What Do the Job Numbers Say?

The unemployment rate in the U.S. insurance sector remains remarkably low at around 2.1%, which reflects a tight labor market where finding and keeping skilled workers is increasingly challenging​ (Deloitte United States)​.

What Does the Data Show About Insurance Workforce Trends?

The Current Turnover Rate

Historically, turnover rates in the insurance industry have increased from 8-9% to 12-15% recently, indicating that retaining employees is becoming more difficult​ (Deloitte United States)​.

This study, which is published twice a year, looks into how the insurance industry hires and keeps employees. The most recent report examined around 270,000 workers in the U.S. insurance carrier market, representing about 17% of the total market. Most of these employees (77%) work in property and casualty (P&C) insurance, with the rest in life and health (L&H) insurance companies (22%) and reinsurance companies (1%).

In the past 10 years, most insurance companies operated with roughly an 8-9% staff turnover rate, whereas now, it’s more typical for companies to operate in the 12-15% range, with voluntary turnover spiking at more significant levels. Currently, insurance carriers in the U.S. have around 1.56 million employees, which is 85,000 fewer than in 2020. This drop highlights a significant trend in how the insurance industry is hiring and keeping workers.

Who’s Conducting the Studies?

Studies such as The Jacobson Group and Aon-Ward’s semi-annual survey provide insight into hiring trends in the U.S. insurance sector, revealing a workforce of about 270,000 in the carrier market, which is around 17% of the total market.

What Are the Hidden Costs of Turnover in the Insurance Industry?

How Much Does It Cost to Replace an Employee?

The costs associated with turnover are substantial and include:

  1. Recruitment: Advertising and agency fees.
  2. Hiring Process: Time spent on interviewing and screening candidates.
  3. Onboarding: Resources used in integrating new employees.
  4. Training: The investment in training new employees impacts productivity.
  5. Productivity Loss: Gaps in staffing reduce overall productivity.
  6. Employee Morale: High turnover affects the morale and engagement of remaining employees.
  7. Errors and Quality: New employees are more likely to make mistakes, affecting service quality.
  8. Unemployment Claims: Higher turnover may lead to increased unemployment claims and insurance rates.
  9. Worker’s Compensation: A high turnover rate could correlate with increased claims, impacting premiums.
  10. Training Materials: Ongoing costs associated with educational materials for training.

Employee turnover is a natural part of business, but there are hidden costs directly tied to turnover rate. We often think of turnover in terms of lost talent, but the financial implications run deep. Let’s unravel the hidden costs associated with turnover.

1. Advertising:

As soon as you receive a resignation letter you begin the search for another employee. This isn’t as simple as a single post on your company website anymore. Recruiting agencies, hiring services, and temp agencies command fees. Plus, there’s the cost of ads on social platforms like Facebook or LinkedIn. And don’t forget job boards like Indeed or Monster. These seemingly small expenses add up quickly.

2. Interviewing, Screening, and Hiring:

Think about the time it takes to screen and interview candidates. For small to medium businesses, this often means key players are diverted from their core responsibilities. The question then arises: what important tasks are being left undone in the meantime?

3. On-boarding and Orientation:

On-boarding is no small task. Depending on the company and role, this process can span from a day to several weeks. It’s time that’s invested, but not directly productive.

4. Training Time:

Training isn’t just an investment of the new hire’s time, but also of those who train them. More often than not, managers and key personnel find themselves involved in the training process—explaining, answering, and rectifying. The “shadowing” process, while essential, does slow down production rates.

5. Lost Productivity and Opportunity:

Every hour spent on training or filling a vacancy is an hour lost in productivity. It’s crucial to ask: can management even step into the shoes of the departing employee? In most scenarios, they can’t. Managers are swamped with their own duties. Hence, time slips away, opportunities vanish, and the cycle continues.

6. Decreased Engagement:

Turnover doesn’t just impact the bottom line; it affects the morale of existing employees. Watching colleagues leave, especially well-performing and well-liked ones, can be disheartening. This often leads to decreased engagement and productivity among the remaining staff.

7. Errors:

New hires, despite their best efforts, have a learning curve. Mistakes are bound to happen. These inaccuracies not only disrupt the workflow but can be a potential liability. For businesses in professional services, errors might even open the doors to litigation.

8. Unemployment:

Unemployment isn’t just about paying benefits. It also encompasses the time and money spent on potential legal proceedings. Moreover, as more ex-employees file for unemployment, your unemployment insurance rates could skyrocket.

9. Worker’s Comp:

A direct correlation exists between high turnover and increased worker’s compensation claims. A rise in these claims can adversely affect your experience rating, leading to higher premiums. This translates to more lost income and missed opportunities.

10. Training Materials:

The tools used for training come with their own price tag. Whether it’s old-school printed materials or sophisticated online platforms, these costs are recurrent and often overlooked.

How Can Insurance Companies Reduce Employee Turnover?

What Strategies Are Effective?

The insurance industry has been transitioning to digital and new ways of working during the pandemic, which has solidified the importance of flexibility, good relationships with coworkers and supervisors, and newer workplace values, such as diversity and inclusion and environmental consciousness.

Here are some strategies implemented by Staff Boom to reduce turnover rate through our outsourcing efforts specific to the insurance industry:

  • Promote Health and Well-being: Comprehensive health benefits can support employee health.
  • Career Development: Opportunities for growth can make employees feel valued.
  • Work Flexibility: Remote work options can help employees achieve better work-life balance.
  • Improve Communication: Strengthening communication can build trust and improve engagement.
  • Positive Workplace Culture: A focus on inclusivity and diversity can attract and retain talent.

Why Consider Outsourcing?

One of the ways insurers can adapt to all of the aforementioned changes is by outsourcing their non-core functions to third-party service providers. Outsourcing can help insurance companies deal with a high turnover rate by providing them with access to a larger pool of skilled professionals who can handle the workload1. This can help reduce the burden on existing employees and improve their job satisfaction, it’s here where Staff Boom comes in with several years of experience and several clients as well. Additionally, outsourcing can help insurance companies reduce costs by providing them with access to more affordable labor markets2.

How Can Outsourcing Help Managing Employee Turnover?

Outsourcing non-core functions can help manage high turnover by accessing a broader talent pool and reducing workload on existing staff, potentially at a lower cost​ (Deloitte United States)​.

In Conclusion: The Real Cost of Turnover

Understanding and addressing the various costs associated with high turnover allows businesses to better strategize their workforce management, ultimately saving costs and boosting productivity over time.

Relevant Links and Sources:

Phillips, Ebony, “Strategies to Reduce Employee Turnover in the Insurance Industry” (2023). Walden Dissertations and Doctoral Studies. 12185.

Market Report by McKinsey.

Joe Overley

Director of Sales

Joe Overley is a Director of Sales at Staff Boom. Joe is an accomplished executive who possesses exceptional leadership skills and a proven track record in sales. He has a unique ability to establish strong relationships with people and inspires and motivates them to improve their relationships, sales, training, and knowledge. Joe’s unwavering commitment to success and his approach to staff training and development enabled him to achieve rapid advancement in the insurance industry. In his previous job, Joe was promoted to the district manager position within the first year of joining the company and subsequently became a regional sales manager, ultimately attaining the Vice President role within five years. Joe was responsible for several critical functions, including developing the sales process, sales training, and management development. He also oversaw the organic expansion of brick-and-mortar offices, the web sales environment, the agency call center, and quality control procedures for Northern California and Nevada.

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