The shortage of technical skills in general insurance is at a five year high, claims the latest Skills Report by the Chartered Insurance Institute (CII)¹, with more than 80 per cent of firms experiencing a detrimental effect on business performance.Of the 2,884 CII and Personal Finance Society (PFS) members polled, the skills shortages were felt hardest among the claims and London market sectors. With rises of 15 per cent and 17 per cent on the previous year, these areas are also experiencing the worst impact on performance; 87 per cent and 89 per cent of members respectively have identified themselves at a disadvantage because of the technical skills deficiency.
Despite reporting a nine per cent improvement on the 2010 figures, members in the underwriting sector still believe the shortage in technically proficient recruits to be damaging to their operations. Broking was the only sector to report a contradictory six per cent improvement in performance despite a greater skills shortage.
Julian James, president of the CII, says: "Four out of five CII member companies say that their businesses are being negatively impacted because of a deficiency in technical skills. This is a long-term problem and, if we don't start to solve it, we will have fallen behind our competition in less than a decade. This is why the CII has created and is actively promoting its skills programme. We need to get young people interested in what we do, and then provide them with the training they need to ensure the long-term competitiveness of our industry."
In terms of working with young people now, some members' comments suggest that a gap exists between employers' expectations and their experiences with new recruits. Some respondents cited the skills shortage as the product of a "text message and Twitter generation" who are thought to be overly familiar in their communications.
Young entrants were also considered to possess a "world owes them a living" attitude, with graduates especially expecting rapid progression without the necessary hard work.
While the technical skills shortage is an obvious burden on the industry, the aptitude of new and existing staff in basic literacy, numeracy and IT is also a concern. For the first time, the CII's Skills Report asked members whether they had funded remedial training over the past year.
The findings suggest that many firms are faced with investing to bring literacy, numeracy and IT skills up to standard. Of the firms polled, 40 per cent reported having to provide literacy training for school leavers, 41 per cent for existing staff and a quarter of businesses financed additional training for graduates. Staff fared marginally better on numeracy, with a third of employers funding remedial training for school leavers, 18 per cent for graduates and 30 per cent for employees, while the IT skills of current staff were cited as requiring most resources - just over half of firms delivered training to existing employees, compared to 27 per cent to school leavers and 17 per cent to graduates.
When compared to a recent skills report by the Confederation of British Industry (CBI)², it emerges that the insurance profession makes a higher level of investment in remedial training than industry as a whole, possibly indicating that the insurance sector is not attracting the highest calibre of candidates.
With regard to how the current skills shortage will affect UK competitiveness in the long term, 60 per cent of general insurance professionals believe that, if the technical proficiency of new entrants does not increase, the profession will fall behind its rivals by 2020.
However, pessimism in industry performance is not solely a UK issue, as revealed in this year's Centre for the Study of Financial Innovation (CSFI) Insurance Banana Skins survey³.
This catalogues twenty-five risk areas facing insurance across the globe and highlighted similar worries from markets including India, The Gulf and Singapore. Talent appeared on the list for the first time at number six, so it would appear that attracting capable new recruits is a worldwide problem.
Training is also seen as key to improving performance; however the unstable economic climate is impeding investment. Aside from broking, where budgets remained constant at seven per cent, all other areas saw a drop in investment, with claims experiencing the most significant decrease in expenditure from 12 per cent to four per cent.
In spite of a reduction in training budgets, the CII has observed large numbers of employees signing up to the Aldermanbury Declaration. The voluntary declaration was launched in March 2010 and calls upon the sector to commit to better outcomes for customers, improve standards of risk management and increase trust by working towards higher professional standards.
More than 210 firms have already signed the declaration which suggests that, although investment in training has stagnated, general insurance firms are looking to be more efficient. A third of employers answering the survey said they intended to target training more effectively, with the continued professional development of staff a priority.
The research highlighted a concern that the education system is not properly preparing students for work. However, there is a direct correlation between the disciplines which engage with young people and those that possess a positive view of recruiting straight from education, which suggests that, consciously or subconsciously, experience with the young impacts on opinion.
Firms in the London market offer the highest number of work placements or internships, with 66 per cent of members who consider the education system is meeting the requirements of the industry well.
Equally, underwriting, in which 60 per cent of firms offer some form of work experience, has an almost equal number of respondents (61 per cent) believing schools provide a strong grounding for professional development.
Brokers are most pessimistic, with only 42 per cent believing the education system serves the industry well and 53 per cent engaging with students. Nonetheless, despite a lack of opportunities in the broking sector, the number of firms offering work placements or internships has increased by 12 per cent on the previous years' figures.
The CII believes the increase in work experience opportunities may in part be attributed to its Discover Risk campaign, whereby the aim is to attract the brightest talent from schools, colleges and universities to the industry.
The campaign has had a notable impact on perceptions - over two-thirds of those who have played the Discover Risk game would consider a career in insurance.
On the back on this, awareness of the Discover Risk campaign within the industry is also on the up, recording an 11 per cent rise since 2010, as employers look to forge business links with educational institutes and tap into the most promising recruits.
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