By Mike Koscielny, MBA, CIC, CPCU
Director of Field Marketing for Graduate Business Programs at Olivet College, CEO and Founder of Born2Lead LLC, and National Faculty Member for The National Alliance For Insurance Education & Research
The insurance industry, while very resilient due to its economic importance, is not immune to financial difficulties. Historically, the industry has proven to be recession and pandemic-proof largely due to the ability of all who call this industry home to navigate through those challenges. The insurance industry also has two sides to the layoff coin, the insurer (or company) side and the independent agent/agency side.
During an episode of the Awkward Insurance Podcast (Decoding Insurance Industry Layoffs), Ashley Fitzsimmons with Ohio Insurance Agent’s Association expressed that insurers may be experiencing layoffs, but she receives a consistent request for service professionals and producers that can hit the ground running. Independent agencies are facing a shortage of talent while insurance carriers are sending surplus talent into the market.
Here are some of the most recent challenges faced by some insurance companies today:
- Todd Combs, CEO of GEICO, said in his letter to employees that the October 2023 move to lay off employees was made to “better position [GEICO] for long-term profitability and growth.” The layoff represents 6% of the company’s workforce.
- In late August 2023, Farmers Insurance said it was laying off 11% of its employees throughout all its business lines to better position itself for long-term profitability and growth.
- In the 2021-2022 fiscal year, four insurers in Florida ended up in receivership (two more filed late 2022) casting hundreds of employees into the marketplace.[i] Why? Profitability!
[i] “Annual Report 2022: Division Of Rehabilitation & Liquidation.” Florida Department of Financial Services. Accessed November 28, 2023. https://www.myfloridacfo.com/docs-sf/rehabilitation-and-liquidation-libraries/rehab-static/rl-annual-report.pdf.
See the common thread here? A great leader once told me when we were staring down the barrel of significant losses, “Nothing good can happen until you are making money.” A common driver for most insurer layoffs boils down to profitability.
What drives profitability challenges? There are many reasons. Certainly, unexpected losses, regulatory environment (such as an inability to secure necessary rate changes or limitations imposed by regulators), scarcity of necessary reinsurance, and sometimes just bad business decisions.
Once the future looks unprofitable for insurers, they begin to look beyond rate changes. When rate relief is not in the cards, in the short run, cutting expenses related to doing business (operating expense or OpEx) can be an immediate solution. All in, expenses for an insurance carrier can range from 20-35% of the premiums written, not including paying for losses and adjusting expenses.
In most cases, the human capital (employees) of a traditional insurance carrier represents up to 80% of total operating expenses. In times of rapid growth, more people are hired to handle the growth but when business slows and profit erodes, immediate relief can come in the form of reductions in force (RIF). Also known as… Layoffs!
From my personal experience, layoffs are never pleasant for the employee or the manager who is charged with deciding who stays and who goes. It is an agonizing process and life-altering for managers and employees alike.
This explanation of layoffs and how they occur may be an oversimplification, but the truth is not far from what has been suggested. The most important thing for everyone fearful of layoffs to remember is this: Be prepared!
Steps to being prepared:
While working for an insurance company, your loyalty is to the company, its goals, and its objectives. However, do not forget about being loyal to yourself. It’s time to “layoff-proof” your career! Here are some tips to keep in mind as you navigate your way through your career.
1. Keep Your Ear to the Rail
Pay attention to information shared from your local office and from the Home Office. Combined ratios (CR) over 100% and high growth are not sustainable in the long run. A combined ratio (CR) over 100% indicates underwriting loss; the goal is to have a combined ratio below 100%. Ask your management what the plans are to “fix” those issues. If don’t get answers, go to senior leadership. If they are not willing to share their plans, it’s time to start looking.
2. Make Yourself Indispensable
Pursue insurance designations, be involved in as many carrier activities as possible, and diversify your skill sets. Don’t be afraid to, when available, learn new aspects of your carrier’s business and be open to trying new responsibilities. This builds your value.
3. Grow Your Network
That means within your company, and in our industry, and don’t forget to create a network of recruiters. A good friend always reminds me that your network is your net worth. You never know when you will have to reach out to them when you are laid off. They can be your best resource for new opportunities.
4. Be Open to New Paths
I have always said if you don’t have a plan, you will be part of someone else’s plan. You control your career path and learning new things builds your resume and helps make you indispensable or very attractive to other employers. Don’t be limited to carriers, consider joining the ranks of agents and brokers.
If layoffs never affect you, these are great suggestions to help you as you move through your career at your current employer.
Layoffs are not the end of the world. I was job eliminated about halfway through my 40+ years in this great industry. It was tough to take. I had lots of self-doubts. What could I have done better? Like everyone I know, I had a “pity party”. One day, my wife said, every party needs to come to an end, including “pity parties”. That’s when I triggered my network, and the rest of the story is history.
For me, I followed my own advice and was prepared using the “tips” I outlined here. In the end, I felt I was blessed that this happened to me. My career path changed dramatically. I found myself in a position to have an even bigger impact to the companies I served.
I found myself leaning on the leadership lessons I outline in my new book, Born2Lead: Lessons in Leadership. Those 13 lessons helped prepare me for the roles that would follow, but the most significant one, the one that ties everything together is being persistent. You see a great lesson I learned as a little boy on the knee of my grandfather Albert, was the story of The Little Engine That Could! I Think I Can! I Knew I Could!
Layoffs can be a blessing in disguise. When a door closes, look for an open window!
