Gaps in technical skills and talent in the Indian general insurance industry

(This is an article that I had contributed to the January 25 issue of the iBroker magazine of the Insurance Brokers Association of India)

Historical perspective:

One can arguably say that the Indian general insurance industry has gone through two major inflection points in the last 70 years of its growth and development.?

The first one was the nationalisation of the industry in 1972, when the existing private insurance companies were nationalised and amalgamated into one of the four public sector insurance companies, viz., The New India Assurance Co Ltd., United India Insurance Co Ltd., Oriental Insurance Co Ltd and National Insurance Co Ltd., with the General Insurance Corporation of India becoming the holding company.?

The second inflection point was the opening of the industry to private competition in 2001 with the setting up of the Insurance Regulatory and Development Authority (IRDA). This opening up of the industry was accompanied by deregulation and tariffs being progressively dismantled. The Tariff Advisory Committee (TAC) was converted into the Insurance Information Bureau (IIB).?

The era of nationalisation of general insurance industry (1972 - 2000):

During the nationalised phase of the general insurance industry, the business was governed by tariffs in most classes of business such as motor, fire, engineering, marine and workman compensation. For miscellaneous classes of business which were not subject to tariff, there were “market agreements” which the insurance companies by and large followed.?

The technical knowledge in those days implied mastery of the various tariffs or market agreement rules and provisions. The tariffs were amended by the TAC by issuing circulars from time to time to respond to demands from the market. “Expertise” to a large extent meant, the knowledge of the various tariff provisions by rote and the amendments introduced through the circulars. Since internet and online resources were not available, a tendency amongst the experts to “hoard knowledge” and become indispensable or important, was also fairly common.?

A drawback of the overreliance on tariff was the inability of the market to develop talent with critical thinking skills. The skill to operate in an environment where there were no tariffs was sadly not developed. Thinking out of the box was also not encouraged given the work culture of conformity with rules and regulations in the public sector. Without the crutch of tariffs, the industry could not walk.?

Recruitments during nationalised era:

While the general insurance industry suffered from lack of real underwriting skills due to the presence of tariff scriptures, there was a robust process for recruitment and training of officers and staff. There was a standardised process of common recruitment of direct recruit officers through open competitive examinations followed by personal interviews. The industry attracted quality talent as a high esteem was placed on civil service or public sector jobs when compared to the private sector ones.?

Unfortunately, the direct recruitments on a large scale for all four companies were frozen after 1991, after which limited special recruitments were made. The effects are today being seen in PSU insurers, as they are facing senior management talent shortage, due to the direct recruit officers hired upto 1991, retiring at a rapid pace with no subsequent batches to replace them.?

Training during the nationalised era:

The PSU insurers had a great training architecture in place, during the nationalised era which still continues to this day, albeit in a weakened form and shape.?

All the four companies had their own officer’s training colleges, with permanent faculty drawn from the company cadre. New officer recruits were trained for 6 months, split equally between classroom and on–job-training at various regional offices of the companies. The institutes also provided specialised training besides induction training for new joinees. The PSU culture placed a great deal of emphasis on compliance with rules and regulations. This required officers to be trained thoroughly in tariff provisions, policy wordings and manuals of the companies. Aside from the officers’ training institutions all companies had their own regional training centres (RTC), with permanent establishments of their own, which conducted regular year round training for staff and agents.?

Post-nationalisation from 2001 till today:

Most of the new private companies that were established post deregulation were joint ventures with foreign insurers. Amongst brokers, several multinational broking entities also set shop in India. In the initial stages, the foreign partners invested in skill development of their JV’s by providing underwriting, claims and product development support. Many new products, particularly in the liability segment were developed.?

However, over time, the foreign insurers started withdrawing from the day to day management of the JV’s. This also impacted the skill development in the local entities as the involvement of foreign insurers became more of investors rather than operational partners to Indian promoters in running of the companies.

Aside from new product and process introduction, new subjects also got opened up like actuarial and business analytics. The regulatory requirement for actuarial guidance to the insurance companies opened up the profession to a section of statistically and mathematically inclined young talent. While there has been an over supply of actuarial talent in the insurance industry, the same could not be said about hard functions like frontline sales, where talent is always in short supply.?

Recruitments after opening up of the market:?

The deregulation and opening up of the market led to a war for experienced talent in the industry. Many experienced hands from PSU’s joined these newly formed entities. The new private entities also started recruiting talent from other industries as well as campus hiring from institutions. But over time, the entities stopped hiring and started poaching from other entities. So the available talent started circulating from one company to another. The companies who did hire fresh talent, did so in a limited way since they were not confident of retaining the talent on a long term basis to justify their investment in hiring and training. Consequently, the talent pool has gotten shallower with time. Many new recruits reached high positions that are not justifiable given their talent or subject knowledge, but due to their playing their cards smartly or being at the right place at the right time.?

Training in the deregulated era:

The training standards in the market have dropped considerably when compared to the nationalised era, with focus being on speed rather than depth. Many new recruits are thrust into their jobs in sales, underwriting or claims with very less intensive training and they are expected to learn things on the job. In the absence of formal training and mentoring programmes, the skill development has faltered. Further, unlike the nationalised era, when new recruits got opportunity to work in diverse fields such as underwriting, claims, reinsurance or marketing, the new hires in the post nationalised era have largely been pigeon-holed into one job profile, without opportunity for rotation and gaining lateral skills and experience.?

Current situation:?

In the nationalised era where the PSU companies could attract talent due to lack of attractive career options in the private sector, the liberalization of the Indian economy saw the emergence of the private sector in a big way. Private sector jobs with more pay and better perks became more attractive career options for a large pool of talent. Insurance industry had to fight for talent with the private sector segments like banking and financial services, IT, FMCG and other high paying segments of the economy. Consequently, the industry cannot attract the same quality of talent which it used to in the nationalised era.?

The inability of the insurance industry to attract talent coupled with retirement of experienced hands has led to a serious talent gap. But this situation is not unique to India but across the world. Insurance business is not seen as a career of choice by the Gen Z cohorts.? Insurance jobs are seen as boring and sales driven, with little scope for individual initiative or excellence. Insurance industry has also not been able to meaningfully utilize the new generation talent which they have hired.?

There is a feeling amongst new hires that they are being used as mules or beasts of burden with no job enrichment. They are attracted to new and emerging areas like Artificial Intelligence, Investment Banking or Hedge Funds which are more fashionable and challenging holding a lot of appeal. On the other hand, some of the industry old timers feel that the new generation is an entitled bunch with high expectations and unwilling to do the hard work and long term application needed in the insurance business to succeed.?

Suggestions for bridging the talent gap:?

Talent and skill gap cannot be addressed on a piecemeal basis. There is little purpose in focusing just on hiring or training alone. It needs a holistic approach that includes investment in talent, hiring, training, mentoring and long term career development. Unless this realisation is not there in the insurance industry, nothing much can be achieved to resolve the gap issue.?

The insurance industry needs to work with the academic institutions to come up with a comprehensive programme on insurance education starting at the school level leading to graduation. We have been having university graduation programmes across the country in specialised subjects like Geology, but not in insurance, when the number of insurance folks far outnumber geologists by several multiples. There may be some tens of thousands of geologists in India, where there are lakhs of insurance practitioners in the country working as agents, brokers, loss adjusters or in insurance companies or TPA’s.?

Once the pipeline of talent is established in association with academia, the next stage is to ensure that the talent that is hired is properly trained and mentored. Currently, the training programmes are not properly designed with a few days or weeks of induction training with little follow up or evaluation of long term learning milestone achievement. General insurance is a vast subject and for the new joinees to develop and mature, it will take a considerable amount of time. Hence learning by osmosis is also necessary where the new recruits work with experienced people and learn on the job with continuous evaluation.?

Lastly, the skill development is inextricably linked to how the skills are put to use by the organisation. General insurance is application based. If the skills unutilised for a long time, they will be blunted. Human resources planning whereby talent is deployed in the right manner is also extremely important to keep skill and talent gaps to the minimum possible.?