Your best people are your greatest asset

Attending a meeting of Executive Search Consultants in London it would appear that the Executive Search Sector is alive and well and a developing market. Good news for Insurance Executive Solutions! The meeting was organised by the proposed governing body – Association of Executive Search Consultants which has been around (but in the background) for 20 years or so. Regulation – all be it self regulation – appears to be coming our way. This is surely a good thing from the client and candidate perspective – adherence to professional standards, training and educational requirements for practicing, accountability etc.

However, of more relevance here is the data which was used to demonstrate the existence of the “War on Talent” which, it was suggested is as alive today as it was in 2003 when the phrase was ‘coined’ by Mckinsey Consulting.

US data suggests that the “Baby Boom” generation of 77million people will be replaced by 44million. In 2010, there will be a 33% decrease in the number of workers over the age of 40 and 50% of the top people in US companies will leave over the course of the next 5 years. Obviously, when this data is extrapolated to apply to the UK, it is possible to see that change is on the horizon. This will come as no surprise to many in the Insurance Industry – where, as one example, consolidation is already rife due in part to an ageing population of broker owner-directors who are part of that “Baby Boom” generation – and who now wish to spend more time playing golf or collecting stamps.

Is there an increasing war for talent at the executive level? In general terms, declining population figures would suggest that that there is, however, bearing in mind market consolidation, ‘internetisation’ and the ever-increasing automation of process by IT, there are surely fewer jobs to fill at all levels as well as at the executive level. Perhaps, to some degree these factors will cancel eachother out?

Further data from a global study suggests that 75% of HR executives put attracting and retaining talent as their main priority and 40% of employers worldwide say that they are having trouble finding talent. Is this simply a feature of population statistics or are they looking in the wrong places for the wrong people? What might be a contributing factor is poor selection processes – both on the part of the recruiter or head-hunter and on the part hiring company. In too many instances in our experience the needs of HR, line management and the business are poorly aligned. Add to this the agenda of the external supplier – to make money! Poor hiring decisions, could be said to be inevitable! The answer is, of course to build long-term relationships with trusted suppliers – in that way successful placements are part of a continuum and not one-off ‘scrambles’ to make fees. Our data shows that our greatest long-term successes are with business where we know the senior staff extremely well, we know as much (if not more) about the business as most of its employees and the senior team shares with us their vision, their plans and their aspirations. That way we can work effectively on their behalf – both reactively and proactively – and if there is a war on talent we are already having successes behind enemy lines.

Finally, other data which might be of interest includes the following - to date, 50% of American Nobel Prize winners were born overseas. In addition, 50% of all successful US PhD students have been immigrants and 25% of Silicon Valley was started by Indians and Chinese. Data shows that China and India are now successfully taking back ex-pats and interestingly the US is reducing the number of Visas issued from 195,000 in 2007 to 65,000 in 2008. Clearly the antiquated Western immigration systems are not focussing on the acquisition of talent. The over-used 1990’s phrase “people are your greatest asset” must, of course still ring true, but perhaps it should be qualified – “your best people are your greatest asset”. Thus, in a changing world, be clear in your definition of ‘best’ and go out there and recruit and retain them – their intellect, their energy and their ideas will surely drive your business forward.

While there may or may not be a war on talent, there is always a battle for the best!

The heart of insurance

Insurance is often viewed as a ‘heartless’ business – all about making money and not about the customer! Ultimately, all business is surely about making money, but insurance should be a balanced gamble between the client and the underwriter.

On two occasions recently examples have come to light in which insurance businesses have shown that insurance is not all totally heartless!

A small business in Surrey specialises in providing travel insurance for ‘high risk’ individuals suffering from terminal and serious illnesses. Obviously this is business which most underwriters will run away from on the basis that it is simply too high risk. The company I am dealing with underwrites each case individually, with a knowledge of medical conditions, treatments and medical facilities at the destination – they truly assess “fitness to travel” at the point of travel from a medical point of view. Their plan at present is to look for more underwriting capacity in order to spread their underwriting risk so that they can underwrite some higher risks – in order to “truly make a difference to quality of life” in certain cases. Thus they want to insure the “uninsurable” and enable even more people to make those last trips to say goodbye to family and friends, to have that last memorable holiday etc. A heart-warming business in a cut-throat world.

The other example is an insurer which paid property damage claims during the flood – often within hours of the claims being made. In fact our experience indicates that the response to the “flood claims” by most insurers was fantastic. Also, what a good selling-point for insurance – you only need a single disaster to justify years and years of insurance premium payments!

Isn’t it time the insurance industry began a PR campaign promoting their good points?

Lloyds Brokers!

Operating as head-hunters in the UK insurance market we get involved in moving teams of brokers from one company to another – with their “books of business” (clients to the rest of us!). To some extent, this strikes me as verging towards unethical, but it is standard practice in the insurance industry – and we make sure that it is ‘above board’ – and in most cases we the book of business is moved on an agreed (usually commission sharing) basis for the first 12 months.

An interesting contrast appeared recently. We moved a 2 person team of Lloyd’s brokers from one Lloyd’s broker to another – with a book of business amounting to c.£550,000. We also moved a small team just outside London from one non-Lloyd’s broker to another non-Lloyd’s broker with a book of business amounting to c.£1m. Combined salary for the Lloyd’s team (excluding t&e, NI, tax, pension) was in excess of £160,000. Combined salary for the ‘provincial’ move (excluding t&e, NI, tax, pension) was less than £100,000 – yet almost twice as much business transferred!

Since our fees relate to salary, the Lloyd’s opportunity made more money for us! My concern, however is with the differential between the two with regard to revenue and remuneration – and my question is, “Is the Lloyd’s broker market sustainable long-term with such high salaries and such slim margins when compared with the ‘provincial market?” If I had a choice, I know which part of the insurance industry I would invest in! Look at the return Peter Cullum has made in 10 years for example!

However, I am sure that I must be missing something. These figures are not made up and they are not unusual. Is the explanation that business broked into Lloyd’s is so much more profitable than business broked into the company market? Are the bespoke Lloyd’s deals so much more lucrative? Do Lloyd’s brokers command such high salaries because of their genuine expertise, ability and market knowledge? Could 'provincial' brokers with books of business move to Lloyd's brokers and command significantly higher salaries?

I would value comments and answers – if there are any!