Recent observations show that the number of business and management students preparing insurance degrees has declined worldwide. This article is extracted from a contribution to The Geneva Association’s Insurance Economics Newsletter by Dr Madhusudan Acharyya of Glasgow Caledonian University, UK and Dr Davide Secchi of the University of Southern Denmark. In it they share findings of their scientific investigation into the significant factors as to why the new generation of students are reluctant to prioritise insurance as a profession, noting that it is important students be exposed to insurance to ensure better recruitment of talents. This will also create more informed customers.
At the 2007 Xchanging conference in London, Mr Richard Ward, then Lloyd’s CEO, cautioned with alarming information that the GBP100 billion UK insurance industry, regarded as the second largest national export, with a 330,000 workforce playing diverse roles plus a further million people in related fields, is in imminent danger due to the shortage of highly skilled talents. He commented: “Yet nearly 90% of graduates do not consider a role in insurance and 75% of recruiters in the industry struggle to attract quality talents.”
In 2010, the Chartered Insurance Institute’s (CII) survey of 1,755 school and university students’ attitudes towards insurance stated that:
• only 1% was interested to work in the insurance sector (with 15% in finance and 22% in professional services, including law and accounting);
• students regard an insurance career as dull and unethical, involving cheating rather than helping people;
• external sources (the media, teachers, friends and family) who tend to be unaware that insurer’s risk pooling across society actually provides security influenced the students’ career choice considerably, so the students in effect know very little about insurance, which leads them to avoid this industry as a career choice; and
• communication about the value of insurance should be improved among the stakeholders to foster awareness.
Moreover, CII’s skill survey (2012) reported:
• almost two-thirds of employers are suffering from talent shortages, with claims management and underwriting being urgently needed skills; and
• the majority of respondents believe that new entrants joining the industry at both the entry and leadership levels have failed to acquire sufficient skills at school or at the graduate level.
Causes of demotivation in the young for the insurance profession
The UK Border Agency has also added actuaries to the shortage occupation list announced in 2011. Despite the availability of several quality risk management courses and jobs, the lack of collaborative effort among the insurance industry, academics and professional bodies was highlighted as a key challenge to attracting high-quality talents to the profession.
It is noted that, on the one hand, there is frustration among college graduates because of the uncertainty surrounding the choice of insurance as a profession. On the other hand, employers (recruiters) are concerned with the shortage of skills and talents for the future of the industry. At the industry level, several factors, for example, image problem, lack of public awareness, etc, are predicted as the causes of young talents’ demotivation for the insurance profession.
However, no scientific research appears to have yet been conducted to find the causes of this concern.
Collecting data in December 2012 from students at Bournemouth University on three overarching factors (environment, opportunity and awareness) that ultimately influence student choice of insurance as a profession, the study tested three hypotheses in relation to student career choice that are based on these three factors. The analysis employed structural equation modelling (SEM) and regression analysis to test the hypotheses.
Results
The results show that 31% of the students would consider the insurance profession at any stage of their career, 5% of whom place it as their first career option, 7% second, 15% third, and the remaining 72% fourth or lower.
This result is very encouraging, as the CII survey (2010), for example, had reported that 1% of their respondents were interested in working in the insurance sector.
Environment affects students’ choice for insurance profession positively
The study found that the environmental factor positively affects students’ choice of the insurance profession. This result is in line with Holland’s theory of career choice (1985) in that it highlights how the choice is affected by some social aspects that contribute to determining the person–organisation (or prospective career) fit. In response to their attraction to the insurance profession, 47% of the students remained undecided, so there may be a lack of communication by the insurance industry, educators and professional bodies about insurance’s role and value, as several industry surveys noted.
The result from the SEM shows that there are two components of the environmental factor. One is “familiarity” with the concepts and the other is the “origin” of the information on insurance. These two are both contributing positively to explain the latent variable “environment”.
Awareness of the profession shows a positive effect on choice
The result strengthens the role of information in defining how people define their career choices. Being aware of what the insurance profession has to offer seems to contribute to defining students’ choice. What this finding adds to the discussion above is that higher education has quite a significant role in determining student career choices. This is not surprising and suggests that higher education is still considered as a key factor to helping students make their choices.
In addition, it highlights the role of skills and confidence in career choice, consistently with the social cognition theory (Gainor and Lent, 1998). It is suggested that partnerships between industry and higher educational institutions grow bigger so that university programmes provide students with more awareness of the successful career alternatives that may be available.
Opportunity factor not clear
For the remaining hypothesis, however, the study did not find the negative relation between the opportunities associated with the insurance profession and their choice of an insurance career.
At one stage of the study, it was thought that the incentive structure offered by the insurance industry could be an obstacle to attracting talents, but their data did not support this assumption.
This aspect certainly needs more accurate and in-depth analyses, maybe with more emphasis on the theories that inspired this element of the theoretical framework.
Key lies in relaying clearer and stronger information
On the basis of the results noted from the regression analysis and in the SEM, the study made the following general comments.
First, information on familiarity, awareness and origin is the key to individuals in the consideration and selection of their career choices.
Second, this leads to both universities and the industry working on sending clearer and stronger messages to students about the significant role of insurance in creating and maintaining a secure and sustainable society.
Third, the lack of support for the hypothesis that opportunity negatively affects insurance career choice, shows that this choice is not related to particular individual biases or prejudices over the profession (ie motivates for choosing a career) nor to personal capabilities, in particular mathematical and computational skills. This third comment is particularly important in that it shows that there are no limits as to whom to target. Put differently, anyone can become interested in exploring insurance as a career choice. All it takes is clearer and stronger information.
Students are or will be customers
This paper points to the importance of students being exposed to insurance processes and products. This ensures better recruitment of talents, expands the recruitment basis and creates more informed customers. One aspect that can be derived from the findings discussed in the paper is the point of contact between the profession and the students surveyed.
The study considers students as potential workers in the insurance industry, and evaluates the likelihood that they would consider that option in their professional careers.
However, even if they are not willing to consider that option, they will be (they are) in contact with some elements of the insurance business. All of them are customers, have dealt with insurance- related products in the past and/or will in the future. The fact that most students may not know much about career opportunities, may not be interested or may not be too sure about jobs available does not necessarily mean that they do not use insurance-related products.
From this, we may find a first and indirect support to the claim that, even if they are not interested in a career in the insurance business, students may still become good customers.
Need to develop a strategy to educate and retain talents
This study contributes to the ongoing debate on the talent shortage in the global insurance industry. Unlike previous studies, the students in the sample are majoring in mainstream subjects (rather than insurance) and some (categorised as international) have no idea about the broader nature of insurance business, including insurance designations.
This study may help the insurance industry, educators and professional bodies to target the appropriate market to attract and develop talents. Moreover, the significant factors identified in this study can provide the necessary information for developing a strategy to educate and retain talents by addressing their perceptions of the insurance profession.
Since this analysis suggests that students’ current level of awareness negatively affects their choice of an insurance career, closer engagement with university students is recommended to highlight their core understanding of insurance, the broader scope of insurance education and professional routes, along with the opportunities available.
Dr Madhusudan Acharyya is from Glasgow School for Business and Society at Glasgow Caledonian University (London Campus), and Dr Davide Secchi is from the Research Cluster for Cognition, Management, and Communication (COMAC), University of Southern Denmark, Slagelse.