McKinsey – How US insurers can build a winning digital workforce for the future
Executive summary :
The insurance industry is facing one of the most profound disruptions in decades. Technologies including machine learning, artificial intelligence, telematics, and automation already presented challenges to the status quo across the insurance value chain. The COVID-19 pandemic has greatly accelerated that trend. Most insurance executives recognise they not only need to increase their number of digital employees by two to three times but also need to rethink the skills and profiles of this workforce. To date, however, many insurers have struggled to hire and retain world-class digital talent—the competition from tech giants and start- ups has been fierce, the insurance value proposition has not fully resonated with candidates, and insurers have been averse to hiring remote workers.
Everything has changed
The pandemic has reshuffled the deck. The economic slowdown has resulted in widespread layoffs at many tech start-ups. At the same time, a number of financial services institutions have pledged no job cuts for 2020, making them a safe port in the storm. In addition, many insurers have embraced new ways of working—from forming virtual agile teams to emphasising digital channels— at an unprecedented pace, demonstrating their ability to evolve. COVID-19 has also made consumers more comfortable with technology than ever, increasing the importance of digital technologies to support remote insurance advice, policy sales, and claims management.
Unique opportunity
The confluence of these developments provides insurers with a unique opportunity to make significant progress in building their digital capabilities and workforce. Four actions—evaluate remote work and location strategy, redesign the workforce plan, recalibrate the employee value proposition, and rebuild the talent acquisition engine—can position insurers to attract more digital talent.
Obstacles to competing on digital talent
Before the COVID-19 crisis, we looked at more than two million public social media profiles of full-time equivalents (FTEs) across US financial services and insurance firms to gain insight on talent activity and performance outcomes. Using cluster analysis, we identified the number of digital FTEs and their skills across more than 120 large financial services institutions and 50 insurance companies. Two critical findings emerged.
Insurers trail other financial institutions in number of digital employees
In general, insurers significantly lag behind other financial institutions in the number of digital employees. Employees in digital roles (software engineers, designers, product managers, and data analysts) account for 8% of the total workforce at insurers. In contrast, that share is 36% at fintechs and big tech companies (Exhibit 1).
Even within the insurance industry, we found a wide variance. At some insurers, digital talent accounts for 15 to 20 percent of the workforce, while at others it constitutes just 3 to 4 percent of the workforce. The disparity in absolute numbers is also stark: while big tech companies have an average of 20,000 to 30,000 digital FTEs, insurers have an average of 1,000 to 3,000.
Best-in-class insurers have more employees with technical skills
The FTEs in digital roles at insurance companies have a higher proportion of “old world” skill sets (Exhibit 2).
The top skills listed by insurance employees in digital roles are Office, Excel, or project management. In contrast, best-in-class insurers have employees whose skill sets include active coding and development. Just 15 percent of digital FTEs at insurance companies list a coding language on their social media profile; that share is 60 percent at the largest insurers and 70 percent at tech firms.
Mind the gap
Best-in-class insurers seem to have more agile skills overall, compared with average insurers; these skills include scrum master, product owner, or sprint manager.
In general, insurers have fewer people in digital roles and these workers lack up-to-date tech and agile skills. Executives recognised this gap before COVID-19, but the pandemic has made hiring and training digital talent a top priority.
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