Who Will Be the Industry Leaders of Tomorrow?

Management and leadership in the insurance industry will face challenges due to demographic disruption and digital transformation, according to the Insurance Institute’s latest demographic research

The number of older and retiring managers in insurance is one key factor contributing to the looming management and leadership gap our industry faces. The other factor is that new and different leadership skills—such as creativity, flexibility and adaptability—are needed in disruptive times such as these.

Management roles impacted by retirements

With a median retirement age of 60 in the industry, the boomer cohort—which currently represents 27% of the industry—will likely be retired by 2027. That’s 33,750 people exiting the industry’s workforce of 125,000, with more than half projected to retire before 2022.

When we look at people retiring from management roles in the industry, our research indicates that 35% of all managers will likely retire by 2027.

Senior management roles will take the biggest hit: 52% of senior managers will retire by 2027. In the past, new senior management has been supplied by a direct pipeline of qualified candidates from middle and front-line management. However, these ranks will be significantly depleted as well, with 33% of middle managers and 28% of front-line managers also due to retire by 2027.

While it’s not surprising that most of our management roles have traditionally been filled by mature workers and those with the longest tenures, our industry’s managers are actually older than the managers in other industries.

For example, 75% of P&C senior managers are 45 or older, which is much higher than that of the overall workforce (70%), the financial services sector as a whole (69%) and the professional services sector (62%). The story is similar at other management levels: 56% of P&C middle managers are 45 or older, which is higher than the overall workforce (52%), as well as the financial services (48%) and professional services (45%) sectors.

“These gaps have been consistent over time, suggesting there may be different cultures among these sectors in terms of how much experience is required before a person can be promoted into different management roles,” writes Michael Burt, executive director of industrial economic trends with the Conference Board of Canada and author of the report A Changing Workforce: Implications of Technological Disruption for the Insurance Industry in Canada.

Leadership competencies are changing

“In a world that is being redefined by a transition to digital, organizations must not only be willing to adapt to change; they must also be responsive to perpetual change,” Burt writes. “Creating and supporting a culture of adaptability requires new skills and practices from the industry’s managers and leaders.”

Leaders of the past may have been chosen based on experience, tenure, performance and/or subject matter expertise. Leaders of the future will need to be chosen earlier in their careers based on their capacity for critical thinking and strategic decision-making.

As insurance organizations look to adopt data-centric and customer-centric approaches across all areas of their businesses, managers and leaders will be required to make big, decisive and strategic decisions—often in an environment of risk.

Organizations will need to take a multipronged approach to mitigate leadership and management gaps:

(1) Putting greater emphasis on succession planning

Our research shows that succession planning has been most effective when targeting senior management positions, but is not as prevalent in regards to middle and front-line management positions. The high numbers of retirements projected at the middle and front-line management levels will complicate the traditional management pipeline.

(2) Identifying and developing leadership potential sooner

Our research suggests that the industry would do well to adopt more contemporary practices for promoting people into management. Rather than identifying potential managers who are next in line for a promotion based on tenure and technical expertise, it may be necessary to identify potential leadership candidates from groups of workers who are underrepresented in management roles, such as:

  • Women – When we compare the proportion of the total workforce made up of women (62%) with the proportion of senior managers who are women (35% in 2017, up from 28% in 2007), an opportunity to increase women’s representation presents itself. There are important insights to gather from women in front-line and middle management—where they are represented at 59% and 49%, respectively—to ensure better succession into senior positions.
  • Millennials – With the millennial cohort representing 39% of the workforce, there is a pool of potential candidates to consider for management and leadership roles. It will be necessary to build management and leadership competencies in early career professionals more quickly than in the traditional tenured stream, by fast-tracking their exposure to the industry through stretch assignments and real-world projects.
  • Visible minorities – When we compare the proportion of the total workforce who self-identified as being part of a non-white ethnic group (16% in 2017, up from 13.6% in 2009, but still considerably lower than the 21.3% in the general workforce) with the proportion of senior managers (5%) or front-line managers (8.1%) who are part of a visible minority, there is room for more diversity and inclusion in the industry and in management.

(3) Hiring in-demand skills

Our research shows that leadership and management skills:

  • were one of the highest-ranked skillsets HR professionals expect to be looking for when evaluating candidates over the coming two years;
  • were the most important skills of the future for the industry as ranked by C-suite respondents to our executive survey; and
  • will need to come with outside experience and knowledge—particularly in data and digital, which are urgently needed to envision and enable the industry’s technological transformation.

The high demand to replace managers, combined with the changing skill requirements for managers and leaders, identifies the top challenges for organizations in the near future as they look to create a culture of adaptability.

These findings on key challenges for the industry’s management and leadership roles represent just some of the many findings to come from the Insurance Institute of Canada’s decade of demographic research study on the industry’s workforce. Two Institute reports, written by the Conference Board of Canada, are to be published in September 2018: Demographics of the P&C Insurance Industry in Canada and A Changing Workforce: Implications of Technological Disruption in the P&C Insurance Industry in Canada. More information is available at insuranceinstitute.ca/research.

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Copyright © 2018 Transcontinental Media G.P. This article first appeared in the August edition of Canadian Insurance Top Broker magazine

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