Skills gap in insurance industry’s aging workforce is a growing concern

The dearth of skilled workers is not likely to be resolved anytime soon; the expectation is the insurance industry will lose around 400,000 workers through attrition by 2026, according to U.S. Bureau of Labor Statistics projections.

Amid this talent shortage, succession planning becomes crucial in ensuring a smooth transition of leadership roles and critical positions within organizations. In an industry where experience is highly valued, poor planning could significantly erode customer trust and reduce long-term revenue streams.

In a recent publication of RSM’s The Real Economy, our chief economist, Joe Brusuelas, wrote that traditional avenues of increasing labor supply may be insufficient to meet demand and supplementing or substituting labor with automation will take time.

Data analytics, cybersecurity and digital marketing are skills we expect to be in especially high demand as workforce pressure continues. But data-related skills, in particular, will be paramount for various business functions of insurers.

With the increasing availability of their own data, insurance companies can glean more precise insights to inform risk assessment, fraud detection and customer segmentation. The insurance industry recognizes the significance of data analytics, training and upskilling as a valuable approach to addressing the skills gap and improving the industry's competitiveness and effectiveness. Over 50% of insurance providers are hiring workers for data analytics skills, according to productivity software company ZipDo. The surge in data analytics underscores its pivotal role in the current landscape, assisting insurance companies in successfully adapting to the digital era, fostering innovation, facilitating informed business decisions and ultimately delivering exceptional customer experiences.

Taking a data-driven approach will likely lead to greater success. However, its effectiveness depends on various factors, including data quality, the appropriateness of the models and algorithms used, and the specific application goals. Lack of proficiency in these domains can render companies vulnerable to fraudulent claims and imprecise risk evaluations, potentially causing significant repercussions to both financial performance and reputation.

For example, accurately assessing and underwriting risks requires professionals with specialized knowledge of insurance laws, compliance frameworks and risk management practices, but also an understanding of data strategy. The lack of quality data coupled with the lack of professionals with specialized skills in risk analysis, actuarial science and underwriting can limit the industry's ability to evaluate and price risks effectively. The U.S. Bureau of Labor Statistics estimates that insurance underwriters and claims adjusters, key roles in the industry, will decline from 2022-32 due to automation and increased efficiency.

Companies need to ensure that their data-driven decision-making processes consider ethical implications, such as fairness, bias and potential harm to individuals or groups. Having a highly skilled workforce is essential to ensuring this commitment to data quality–and an understanding of data’s limitations—touches every part of the company. When executed thoughtfully, a clear data-driven approach to operations can ensure data privacy, security and regulatory compliance.

Integrating new technologies and digital tools may pose challenges, particularly for an aging workforce that may be less tech-savvy. Fostering a culture of continuous learning and upskilling is paramount to addressing the workforce challenges that lie ahead effectively.

Incorporating advanced technologies like artificial intelligence, machine learning and data analytics allows organizations to streamline their operations, enhance efficiencies and elevate the overall employee experience. Embracing innovation also helps position insurance companies as modern and forward-thinking organizations, appealing to younger generations who value technology-driven workplaces.