Like most industries, the insurance sector entered 2023 amid a high degree of uncertainty. With the Federal Reserve implementing successive interest rate hikes to slow inflation and most economists predicting a rocky year ahead, insurers have – perhaps predictably – reacted by downsizing their workforces.
According to a recent study we conducted – Managing IT in Challenging Economic Times -- carriers’ decision to trim headcount has not affected all areas of the organization equally. When asked to identify the areas that have been most hurt by the economic slowdown, 57% of insurance decision makers pointed to HR, while 45% cited sales and marketing. By contrast, business operations (40%) and accounting/finance (36%) have been less severely affected.
Technology to the Rescue
One area where insurance carriers appear loath to cut back severely is information technology. In fact, 85% of insurers are trying to find ways to enable technology to perform jobs in areas as diverse as IT operations, customer service, sales and marketing, HR and business operations. This effort is well underway, as over half of insurers report a rising ratio of tech to non-tech employees, as well as policies making tech skills mandatory across departments, including non-technical positions.
Accomplishing more with a leaner workforce has also required insurers to intensify their focus on core IT investments that offer the greatest ROI. Not only is more money being directed toward technology across the sector, but IT decisions are being made at a higher level, with CEOs, board members and top operational executives more involved in driving IT investment decisions than in the past. Cloud technology (80%), security (71%) and digital transformation (58%) have been among the biggest beneficiaries of these new investments. Moreover, a majority of insurance executives polled said their confidence in the return on investment from technology investment has increased.
See also: BREAKTHROUGH TECHNOLOGIES FOR 2023
Persistent IT Labor Shortage
While IT is being relied on more and more by insurers, like all companies they are operating against the backdrop of a chronic IT talent shortage. The unemployment rate for tech occupations is a minuscule 2.2%, according to CompTIA. In addition, retaining skilled IT employees has become more challenging than ever. A 2022 report by Gartner found that just 29% of IT workers had a high degree of interest in staying with their current employers.
The employee-oriented job market is putting a strain on insurance IT departments, because over half are having difficulty hiring and retaining tech staffers:
- 54% said they are currently struggling to fill vacancies in technology jobs having to do with cybersecurity (60%), machine learning (72%), data analytics (51%), network engineering (49%), cloud architecture (37%) and data engineering (35%).
- 58% said they are struggling to retain IT staff in specific areas, such as cybersecurity (65%), cloud computing (59%), data analytics (52%) and systems and networks (43%).
How are insurers reacting to these labor challenges? More than half are looking to retain IT staff by offering increased training, rewards and salary increases. But they will need to get even more creative if they want to reap the benefits of increased IT investment. Retraining staff for new and different roles, opening up the talent pipeline to new communities and leveraging external expertise from third parties all have important roles to play in ensuring that insurers get the greatest return on investment, even as they navigate choppier economic waters.