A couple of years ago, a senior executive commented at an industry meeting that the insurance business seems to be populated by “C students.” Oddly enough, the expected outrage never happened. There were some angry letters and emails, but the muted reaction meant either (a) no one reads that stuff anyway or (b) there was a little too much truth in the statement. I think the reason was “b.”

Recently, a truly terrific report crossed my virtual desk. McKinsey & Company, the well known consulting firm, has just published “Building a Talent Magnet.” It is a highly readable call to arms for the executive and education ranks of our industry. The report is written by people who know our business (see their one-line description of the industry’s usual talent building procedure) and who care about the people who make it go.

You should look around your department/company and read the whole thing. Now. But if you can’t get a copy, the folks at McKinsey have given me permission to excerpt some of the key thoughts.

Here goes…

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The property and casualty insurance industry faces a talent challenge. To determine the root causes of the problem and gain insight into current trends, McKinsey & Company interviewed CEOs, other senior executives and board members at leading carriers and brokers. Informed with this set of opinions, they analyzed industry and demographic data to quantify and project the magnitude of the challenge. The resulting picture is not a pretty one.

However, an assessment of successful approaches taken by industries facing similar challenges provided the basis for a set of recommendations. In brief, McKinsey’s findings and recommended actions are as follows:

The property and casualty insurance industry faces three challenges in attracting high-quality talent: (1) a poor reputation, (2) a limited understanding among high school and college students of the industry’s career opportunities, and (3) a limited pool of trained talent.

There is cause for optimism. The industry’s risk management jobs offer many of the qualities — including stability and social relevance — sought by young Americans. The industry’s schools of risk management and its professional associations provide a ready platform for attracting and developing these young job-seekers. Finally, the economic downturn has made some previously inaccessible high-quality talent available.

Coordinated actions are required. To take advantage of these positive factors, the industry’s main participants — insurers, reinsurers, brokers and agents, professional associations and schools — must act with a unified voice to improve the industry’s reputation, build awareness of the industry’s opportunities among students and their advisors, expand the number of graduates from schools of insurance and risk management, and improve the education and training that risk professionals receive.

The work involved will be neither easy nor quick. The potential payoff of upgrading talent will, however, offer a good return on the effort. The property and casualty industry can take guidance and inspiration from the success of other industries and professions
that have overcome similar talent challenges.

While the industry recognizes the importance of talent, it has not attracted adequate numbers of talented people to its ranks. As the workforce matures and the baby-boom generation retires, insurers will compete for new young talent. This talent dogfight will exact its toll on an industry whose workforce is already older than most and whose talent strategy — retaining top producers and poaching from other companies —is already outmoded.

The talent problem, while serious, is not intractable. Several underlying factors are a cause for optimism:

First, the industry’s risk management jobs have the qualities — stability, a good work/life balance, intellectual challenge, strong professional development possibilities, and the chance to make a difference — that young jobseekers want.

Second, now is the opportune time to attract the kind of talent that industry recruiters have only dreamed of in the past. Banks and other financial institutions have been hit hard by the recent financial crisis and are laying off high-caliber employees, curtailing hiring, and, outside the money centers, lowering compensation.

Third, the industry has scale: it employs more than one million people in the United States.

Finally, in the battle for talent, the industry has a hidden resource: a strong network of schools of risk management and professional associations that can provide a platform for launching an effort to re-make its image.

To capitalize on these advantages, the industry’s principal actors — insurers, reinsurers, brokers and agents, together with professional associations and schools — must take on a complex agenda requiring cooperation and collaboration. McKinsey research identified four key areas where they need to work together: enhancing the industry’s reputation; building awareness of career opportunities among students and their advisors; expanding the number of graduates from schools of insurance and risk management; and improving the education and training risk professionals receive.

The property and casualty industry should be encouraged by the example of other industries that have started from similarly weak positions and successfully met their talent challenge. In 2001, the accounting industry in the United States launched a campaign to attract more and better talent and to adjust training and certification programs to meet industry needs. After seven years, the number of college graduates with bachelor’s degrees in accounting grew by 26 percent.

The accounting industry’s example offers more than just encouragement. It highlights the broad competition for talent which is already impacting property and casualty insurers and which will only grow more fierce. The accounting industry, among others, is already taking steps to ensure that it secures the best knowledge workers in the next generation. If property and casualty carriers and brokers do not attack the talent problem with at least as much energy and creativity, they will fall even further behind, perhaps dangerously so.

What is the solution? How do we make it happen?

McKinsey’s analysis suggests the answer to the first of these questions is straightforward:

The property and casualty industry should pursue a multi-pronged strategy that focuses on improving the industry’s reputation, increasing the awareness and understanding of professional opportunities among high school and college students, and enhancing the training of young professionals.

The second question is much more difficult to answer, mainly because the industry has rarely collaborated successfully. McKinsey recommendations, however, depend on such cooperation, and will demand much from key industry participants: individual carriers, brokers and agents, professional associations; schools of risk management and insurance; and the industry as a whole. Each group is well positioned to address certain aspects of the industry’s talent challenge, but success will require a consistent approach and coordinated execution.

Today, few if any carriers, brokers or agents stand out in their ability to attract and manage talent. Doing so requires focusing on four essential talent management processes. First, organizations should take stock of their current talent, processes for developing people and culture. Second, carriers need to adopt a performance management approach that includes a clear performance review and recognition process. Third, they must invest in strengthening their existing talent pool, through enhanced deployment, development and retention practices. Finally, talent recruitment efforts should be adjusted in light of both higher talent aspirations and today’s environment. The first three steps are critical to the fourth: a carrier will be unable to attract and retain top talent if it does not make clear that it values performance.

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Thanks to McKinsey & Company for their permission to quote so extensively.  Here is a link to the full report:

http://www.mckinsey.com/clientservice/Financial_Services/Capabilities/~/media/Reports/Financial_Services/Talent_in_PandC.ashx