The insurance industry is facing unprecedented competition for talent. Despite a short-term surge in unemployment during the 2020 pandemic, the world has already reverted back to pre-pandemic talent shortages. The current difference between the total number of jobs open and total number of available workers is over five million, indicating a tight labor market. Unemployment levels — which includes anyone who is either currently unemployed and/or actively looking for work — continued to improve and recently hit a record low of 3.6%. For historical context, the lowest unemployment rate recorded in the cycle before the 2007–2009 recession was 4.4%.
The insurance industry has always struggled with talent supply and the problems continue to compound. Not only are insurance-related job openings at an all-time high, but the cost of your traditional service roles is on the rise. The “Great Resignation” appears to be continuing into 2022 with firms challenged with employee retention. According to the U.S. Labor Department, 2021 saw a historic high of 47.4 million people leave their jobs. The trend doesn’t appear to be slowing down, with more than 4.5 million people quitting their jobs in March 2022 alone.
A well-designed compensation strategy can have a huge impact on hiring and retention, perpetuation, culture, value creation and the overall performance of the business.
According to MarshBerry’s 2022 Insurance Agency & Brokerage Compensation Study (Study), service staff saw the largest boost in salary in 2021, among all the functions included. Three in four Study participants noted that service personnel salaries were higher in 2021 compared to 2020, while 84% expect them to be higher going into 2022.
As you evaluate your firm’s compensation strategy to recruit and retain talent, here are some important factors to consider.
It’s Time to Get Creative with Solutions for Talent Challenges
When looking at your compensation strategy, don’t overreact – get creative. People costs are the most important investment necessary to building your firm so be strategic and thoughtful. Firms utilize a variety of approaches when improving compensation strategies, but a more focused approach on refining your compensation plan must be addressed proactively and frequently. Often, non-sales related staff have their salaries adjusted annually, but rarely do firms dedicate the time to more strategic items, such as role definition, enhanced bonus incentives, variable plans, non-payroll related items and most importantly, producer commission splits. This is a mistake, as the industry and your clients’ needs continue to evolve creating more pressure on margins and value proposition delivery.
MarshBerry’s 2022 Study shows that the highest performing firm have higher payroll per employee than the average firm which drives higher revenue per employee. It is not rocket science that high growth firms are willing to spend more money on average for top performers which drives efficiencies and scale in all other critical expense categories. Even in a tight labor market, these firms continue to produce outsized results with the following tactics:
Hire Redundant Staff to Build Bench Strength
High growth firms tend to hire more employees newer to the industry (interns, recent college grads, quality people from service industries) which not only fosters growth – but also coaching, mentoring and perpetuation candidates. These individuals can then step up to fill unexpected vacancies. This forces firms to rethink their traditional onboarding and learning program for new talent, while softening the blow when an employee decides to take on a different opportunity. The idea of redundant employees makes sense as the average firm in 2021 lost 15% of its employees and applying average costs per employee on 15% of your staff, makes the investment in new staff more tolerable.
Let Your Average People Walk
The industry is hungry for talent and your average performing employees are receiving higher pay over last year. As much as it hurts to lose people that have contributed to the success of the business, high performing firms realize that growth can move faster than your team’s ability to develop. If your competition is willing to pay higher for lower performers, the organization should embrace the opportunity to level up on talent, potentially at a lower cost. As employee related costs continue to rise, firms should embrace the opportunity to reassess talent and contribution to improve.
Now is the Perfect Time to Reimagine Producer Compensation Plans
Take a white board out in your conference room. At the top write, “what do we need to change in our current producer compensation program to incent new business and protect profitability?” As a firm leader, you should clearly define why it is important to make changes to compensation plans. In this environment, the goal should be focused on retaining your best while managing your long-term goals as it relates to client services, necessary staff as you grow, and margin expectations. A quality shift in your plan can be critical in driving higher quality talent across the board. Technology, marketing initiatives, cross-sell, role redefinition, tiered sales roles, mentorship and evaluating unique commission schedules are all potential ways to differentiate your compensation model.
Now is the time for your firm to ensure you have a compensation model in place that will support your growth goals while attracting and retaining your key talent.
FocalPoint Webinar: Improve Your Compensation Strategy to Boost Growth
With firms spending just under 70% of their revenue on compensation costs, the key is to have reliable and current data to make decisions in a rapidly evolving landscape. With unprecedented competition for talent, employers must take measures to ensure their firms stand out from competitors if they want to attract and retain the best talent. Today, this goes beyond just the paycheck — employees are increasingly looking at the company culture, benefits, flexibility, upskilling, and work–life balance when deciding whether to accept or stay in a position.
Join MarshBerry Director Tommy McDonald as he provides key insights from our 2022 Agency & Brokerage Compensation Study and action items to consider as you look to make impactful changes to your firms’ compensation strategy. Register today at https://events.marshberry.com/FocalPoint22CompTrends.