(Image credit: Jan Antonin Kolar/Unsplash.)
With the books now closed on 2023, now is the perfect time for CIOs and other senior executives at insurance carriers to clarify plans for the new year. The Q1 window is always a critical one for carriers looking both to get the year started on a strong footing while concurrently accelerating to execute on the final approved budgets and plans. While there’s nothing new about needing to focus on both of these parallel tracks, the sheer level of change happening in both the business, and the economy, elevates the importance of prioritization. With everything else in flight, it would be easy to lose sight of human capital management as being a foundational element for pretty much everything else. This comes through with stunning clarity in recent discussions across multiple industry platforms.
Of course, core system modernization remains front and center as a critical issue for Life and Annuity carriers. Unlike both P&C carriers and banks, which generally deliver short liability tail products and services, L&A carriers face profoundly different circumstances driven by extraordinarily long tailed liabilities. An ironic consequence is that the systems being deployed now could well be retired and replaced with new platforms before some of the existing old legacy record keeping platforms run their last cycles. Coincident with this reality is another one key to future state planning: the products being sold today could well still be on the books long after the people supporting them at inception have, themselves, retired.
One of the topics that emerges from this fits nicely under the banner of talent management. With demographic shifts rolling forward, 75 percent of the US Labor Market will be comprised of Millennials and Zoomers by 2030. As Younger Boomers and Older Gen X’ers eye the exits, this has profound implications for many functional areas. While IT is clearly impacted, so are many other high skill areas like Claims, Underwriting, and Actuarial. Viewed through this prism, virtually all carriers face a daunting set of recruitment and retention issues. Considering that Boomers may have been happy with employment relationships that lasted 30-40 years, they may carry huge levels of institutional knowledge. Transitioning that into a workforce that sees “tours of duty” that last only 3-5 years should cause notable concern around just exactly what comes next.
Training Can Last Longer than Tenure
One CIO that I had a chance to talk with lamented that it took them up to 7 years to train people on key functions, but once hired people generally stayed for less than 5. As I pointed out, short of an intentional effort to “dumb their organization down”, a new operational model was clearly in order.
The reality is that from a human capital standpoint, insurers need to take a portfolio view of their resources and align them more in a way that matches up with how technical and operational needs will continue to evolve in the future. We live in a bifurcated world where legacy technology and associated business processes have the potential to have surprisingly long useful lives, even while the rapid pace of change causes the corresponding life expectancy of new capabilities to be surprisingly short. This reality suggests that a one size fits all approach risks becoming one size fits none, increasing challenges across the value chain.
Which ultimately means that knowledge management is critical, both in terms of preservation as a corporate asset, and in terms of transfer between the cohorts of people responsible for delivering key functions. The traditional “tribal knowledge” approach from the back half of the 20th century may simply no longer carry the freight in a world characterized by “just in time” delivery of resources and capabilities.
Framing a knowledge management program has both operational and human capital components. Given how fast the end of the decade is arriving, some key considerations include:
- For the acquisition of new talent, developing appropriate pipelines which allow for the establishment of effective and adaptable feeder networks. This can include internship programs, networks with educational institutions, and professional associations.
- Ensuring that pipelines are flexible and can be exercised quickly. For some functions it likely becomes an almost constant recruiting effort to ensure access to key skills, given the level of dynamism that exists in an economy that is hovering at what many economists consider to be a full employment level.
- For more experienced talent pools, develop off ramps that are gradual and flexible. Many people in this cohort do not really want to simply cut the cord and walk away from work that may have defined them for years or decades. They rather want a more flexible experience in terms of both schedule and location. Accepting these tradeoffs can create a mechanism for older workers that operates in much the same way as an internship program for those on the other end of their own careers.
There is an amazing array of technology emerging today which will have a profound impact on the insurance industry in the coming years. That said, in order to build a future state business model that is effective, efficient, and compliant, insurers need to ensure that they are building from a strong foundation. Some things like a solid core system strategy and robust data environments are likely self-evident. That said, the entirety of the effort is really dependent on the appropriate blocking and tackling on knowledge management. It won’t matter how slick a Generative AI strategy is if a company is spending critical time and resources explaining regulatory or related transgressions on the front page of national news outlets.
It’s good to remember that our successors always have the time and money to fix production problems after they have happened. Now is a great time to prepare for the inevitability of what is happening in labor markets and get ready for a future that is already here for some organizations.