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(Image credit: Adobe Stock.)
With mid-year now fast approaching, this is the ideal time to start reflecting on what the upcoming budgeting and planning process will look like for insurance carriers. No doubt the cost pressures will continue to be felt with companies looking to improve their own financial performance as they grapple with increased competition, changing customer preferences, and rapid evolution of technologies. It is a fascinating time on multiple levels.
A backdrop on all of this are rapid demographic changes impacting the U.S. Labor Force. By the end of the decade, 70 percent will be composed of Millennials, Zoomers, and Alphas.
Matching Platforms to Workloads
Concurrently, for many lines of business, there’s a growing awareness that converting all old/legacy systems is a bit of a fool’s errand. That isn’t to say modern capabilities aren’t potentially terrific. They are. But a one-size-fits-all solution can easily become one size fits none. CIOs and their teams need to carefully consider what the right platform is for each key workload. Failing to do so can quickly result mortgaging the future.
This leads directly back to the labor-force issues. Future tech stacks may well be shaped like a barbell, where new technologies require an almost constant upgrade to deal with rapid obsolescence and old tech can last as far into the future as one can see. Having a pool of talent to deal with this split personality and an uneven pace of change will be key to success.
At the recent Hartford InsurTech Symposium, I had the chance to share insights related to the dual challenges of prospective knowledge and talent management. Talent considerations should also be bifurcated to deal with the two-track technology environment issues. For insurers, this could lead to twin-path Human Resources models. In tight labor markets, considering workers from unique generations differently can create interesting and attractive working environments for all.
Marketing to Labor Pools
Companies historically have marketed products by segment. They can apply some of the same marketing concepts to attacking labor pools. A recent article published by McKinsey accentuates this point, highlighting both coming labor shortages in key areas as well as the need to accelerate productivity growth rates, which have slowed in recent years. The McKinsey article specifically focuses on developing productivity enhancements while concurrently reskilling existing talent. The era of continuous learning has arrived.
McKinsey stresses that, to maintain growth, labor-force participation rates will need to increase from historically low levels. Finding better on-ramps for new talent—even while creating more shallowly sloped off-ramps for experienced workers—will be a key success factor.
Collaborating with ‘Frenemies’ to Pool Resources
Another response to the natural atrophy of skills related to older technologies may be for companies to create consortiums that allow for a pooling of resources to generate better economies of scale. It’s unlikely that many carriers are creating competitive advantage from how they manage legacy systems, even if those systems support blocks of business that carry high proportions of overhead costs. While companies may have traditionally been reluctant to work with “frenemies,” the reality of battling a common enemy could change that calculation in the future.
On the drive to acquire critical talent, companies may want to consider new and different approaches to both recruitment and retention. Labor markets remain highly competitive, and the aspirations of new entrants may be very different than the people who preceded them in the recent past. An interesting article by David Brooks in the New York Times highlights some of the challenges, and aspirations, of new labor force entrants. Ignoring these changes could have significant adverse implications for companies, particularly those focused on long-liability tail products and the infrastructure required to support them.
Once again, the past may not be a particularly good predictor of the future but there are some valuable lessons that can be learned by looking at the details and exploring some of the nuance. Labor shortages in the World War II era, for example, led to a string of creative solutions and productivity enhancements. The new future, arriving even as we speak, will require more granular and targeted responses to problems new and old alike. Let’s roll!
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