While joblessness fears dominate the headlines, the insurance industry faces long-term challenges in filling its key positions, including those of underwriters. Many companies still offer training programs to fill the demand, but experts also see a decline in commitment to education that could force carriers to take other measures.
The U.S. Department of Labor calculates that insurance underwriters held about 104,000 jobs in 2006 and that it expects the field to grow 6 percent in the period ending in 2016.
The Labor Department report says such growth is lower than the average for most occupations. "Underwriting software will continue to make workers more productive, but it does not do away with the need for human skills," the report says. "As a result, employment of underwriters will increase as a growing economy and population expands the insurance needs of businesses and individuals."
So how are companies meeting these needs?
William Feldhaus, professor of risk management at Georgia State University, says his institution is one of about 20 that offers full-scale risk management programs, including graduate degrees.
"But that figure is hard to establish since a lot more offer numerous risk management courses and the like," he says. The program turns out between 40 and 50 undergraduates a year and offers them the opportunity to obtain master's and doctorate degrees.
"Most of our placements are for underwriters. That tends to be a people-intensive position so you get a lot of entry-level positions," says the professor, who has decades of experience as both an academic and insurance company executive.
Feldhaus adds that companies today are looking for recruits with keen analytical skills. "They are also looking for good marketing and communication skills as they will have to sell their ideas and decisions to others," he says.
And this emphasis represents something of a shift recently. "There was a time when underwriters were often shielded from agents and the buyers of insurance because they wanted to keep their thinking pristine," he says. "But nowadays, this sort of interaction is commonplace."
Feldhaus says he has witnessed some decline in the quality of training programs in the big insurance companies over the years.
"This is unfortunate," he says. "Some of the companies were very well-known in the past for doing a very good job in this area. But a lot of them are not doing nearly as much as they used to." Such programs represent low-hanging fruit when budget cutters start wielding their blue pencils. "You can get away with that for so long, but after a while it is going to start to hurt," he says.
New technology may have taken some toll on the number of underwriter positions, but where it has been felt most keenly is among the underwriter's support staff. "So a lot of the underwriters themselves are performing what I call these administrivia tasks with the aid of technology," he says.
And new "black box" programs can underwrite the plainest of vanilla risks. "But even if you do all this and cut down the need of underwriters by a third, you are still going to have two-thirds of the job you have to fill," he says.
Online training programs of varying degrees of quality do exist to fill some of the void, but the commitment to develop talent isn't what it used to be, according to the professor. Generic online programs also can't instill individual corporate underwriting cultures, to the extent that they actually exist.
"Every company thinks they have their own underwriting culture," he says. "Whether or not they actually do of course is another story." Companies do have some proprietary methods they keep close to the vest, and new recruits entering the field must make it their business to understand that.
Alan Jay Kaufman, chief executive officer of Farmington Hills, Mich.,-based Burns & Wilcox, a wholesale agency, says the company actively recruits college graduates each year along with men and women from the general business market "if they have experience that lends itself to underwriting."
"Insurance has not been great in recruiting and promoting the industry, so most students when they graduate from business school have it on the bottom of their list," he says. "Many more want to go into banking."
HOME GROWN AT THE HARTFORD
As senior talent acquisition coordinator for The Hartford, Jana Matra runs the underwriting training program for its Hartford Financial Products Group, which includes coverages such as directors' and officers' and errors-and-omissions coverage.
"We have had a training program for five or six years, but in the past three years or so, it has become more formalized," she says.
Trainees will start sometime in early summer and spend a few days with their manager and mentor, and then they enter into a classroom portion that takes about six weeks. "Once they have completed that portion, they are not given full autonomy by any means, but they go back into their department and start their hands-on training," says Matra.
This segment could take up to a year, but the neophyte underwriters are usually "up and running" by the spring, according to Matra. Trainees can be college graduates or those with graduate degrees and can also come from other Hartford departments looking to change their career focus.
"I would say the majority are new graduates and people with, say, one to two years of work experience," she says. The Hartford Financial Products program is closely connected with the business world because of the nature of its coverages. "So when they come into our program, there is a strong link to the financial and business world. They have to be reading The Wall Street Journal every day and are up on the markets and staying on top of trends," Matra says.
Trainees have to develop their social skills because so much of their work will be dealing with brokers in both formal settings, such as meetings, and more informal settings, such as lunches and dinners.
"It really is a communications job in that way," she says.
Writing skills also come into play, particularly when trainees are delving into the legal aspects of the job they are training for. Underwriters must keep abreast of changes in the law when setting policy coverage terms.These issues are for the most part addressed by the legal compliance team. "But a lot of these changes they need to be well aware of when they are wearing their legal hats," she says of the trainees who must hone their legal knowledge for the day when they step into their underwriter role full time.
Matra says a business or finance graduate would be attracted to an underwriting career because "maybe they don't want to work in the stock market until 9 at night and they want to have more balance in their life."
She says last year 20 persons went through the program, though this year that number will probably be a little bit lower. What she termed a "majority" of underwriting hiring has been done through the training program. Why?
"We underwrite differently from other companies," she says. "Now, I'm sure other companies will say that also. So the best way is to learn from the ground up rather than bringing them in after five or seven years."
Sometimes, of course, a more senior job needs to be filled, and Hartford is willing to wait for the right person. "Often, if we are promoting from within, we will wait six months to fill that job," Matra says.
The Labor Dept. reports that the median earnings for underwriters in 2006 was $52,350 with the lowest 10 percent earning less than $32,270 and the highest 10 percent earning more than $92,240. Underwriters with decades of experience typically make a lot more.
Richard Garcia, director of enterprise recruiting and retention for State Farm, says underwriters go through a six- to nine-month training program before looking at applications. "Some are college grads, some are career change people, and we have some doing internal moves within the company," he says.
Garcia similarly says the training program can't fulfill the company's entire need, and some experienced underwriters are recruited through traditional means, such as Montster.com and CareerBuilder.com.
Obviously, there is some moving around of underwriters from State Farm to other companies, he says, "but not a pace where I would be concerned." Human resources manager Melissa Cline agreed. "With all of our other recruiting avenues, we have been able to fill a lot of the positions without having to do that," she says.
Garcia says that, overall, State Farm's turnover rate has been relatively modest. "We are able to not only go out and find them and get them trained, but we have a good track record of keeping those folks on board," he says. A State Farm spokesman says the company employs about 7,000 people in its "underwriting area," which represents about 10 percent of its total workforce.
While growth prospects for the underwriting field remain below other jobs, according to the Labor Department, the growth will come because insurers are putting new emphasis on making money through underwriting as they've seen returns on investments decline.
"Underwriters are particularly needed in the area of product development, where they assess the risk and premiums for new lines of insurance," the report says.
STEVE TUCKEY has written on insurance issues for a decade for several national media outlets.
April 15, 2008
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