WHAT’S SO GREAT ABOUT “THE GREAT RESHUFFLE”?

How to adapt and thrive amid once-in-a-lifetime labor market

By Andrew Widmaier CLCS, CIC

By now you have heard about the massive wave of workers leaving jobs in the aftermath of the COVID-19 pandemic. The number of U.S. adults having departed their jobs for greener pastures since April of 2021 has passed a staggering 33 million. Though the insurance industry does not get the headlines that retail and restaurants do, agencies and insurers have been severely impacted by the current job market climate.

According to the Insurance Labor Market Study, an investigation of hiring trends within the insurance industry produced by the Jacobson Group, “The industry is amidst ‘The Great Reshuffle’ as professionals waiting to make moves earlier on in the pandemic are now exploring their options and re-evaluating their place at their current employers. This has made recruiting, especially at experienced levels, extremely competitive.”

The same study found that 56% of companies in the insurance industry plan to increase staff in the next year, which creates an unprecedented dynamic—and challenge—for insurers and agencies alike: How do you attract and retain top talent when top talent is suddenly so hard to pin down?

It starts with knowing what the people who work for your organization want out of their work arrangements. Agency office staff have been clamoring for more hybrid work and work-from-home arrangements as a part of their employment agreements.

That’s not to say that agencies have been caught unprepared by the current trends. Insurance agencies have been among the leaders in introducing remote work options for their employees. Long before the pandemic began, agency service staff like account managers and customer service reps were already transitioning to more hybrid situations. Producers had already been operating out of their homes as well, as they are constantly on the road and are infrequent office visitors to begin with.

The bigger shift has been among the agency service staff, whose desire to work from home was accelerated by the pandemic. From a service standpoint, everything these team members do is online—from the quoting process to the agency portal. On the agency side, they typically use an agency management system (itself a repository of mass amounts of sensitive data), and a document filing system (SharePoint and ImageRight are among the better known).

A clear policy … should include guidelines on working remotely, including

everything from technology considerations … to maintaining

a professional appearance during video meetings.

Some agencies even use the agency management system itself as a services tool and document/message repository, which can present certain extra exposures. First, allowing people to remotely log in and out can create opportunities for enterprising hackers. Second, because of the sensitive nature of the files (which can include the full book of business, credit card data, proprietary secrets for client companies, etc.), these systems are loaded with security exposures that need to be addressed.

Agency owners find themselves in the position of having to balance the emerging needs and demands of their workforce with the absolute necessity of remaining vigilant about protecting the information stored within information management systems. Letting employees work remotely may be popular, but it creates all kinds of added risk.

How to adapt

Here are three ways your agency can adapt and thrive during “The Great Reshuffle.”

1. Have a clear policy on remote work. So much of the way offices are structured in the post-pandemic period is the result of decisions that were made during a crisis. As the world shut down in April of 2020, businesses were forced to change policies and offer accommodations simply to stay afloat. Now, two years later, this ad hoc approach to office policy making has left inconsistency and confusion in its wake. Workers want to continue with remote work, while businesses tend to want their employees to return to the office full time. A clear policy on remote work should include guidelines on working remotely, including everything from technology considerations (the use of a VPN, for example) to maintaining a professional appearance during video meetings. Consider some of these areas of risk that can get you in trouble:

• Pay for hours worked: Remote workers can work longer hours than their normal schedule. Under the Fair Labor Standards Act (FLSA), employers are obligated to compensate nonexempt employees for all hours the employees are “suffered or permitted” to work. A covered nonexempt employee must receive overtime pay for hours worked over 40 in a workweek and the employee should accurately track their hours and report their actual time worked so they can be paid appropriately.
• Reimbursement for business expenses: Employers are not required to reimburse employees for expenses that are incidental to the employer’s business under federal law, but some state and local laws may require employers to pay for business expenses. For instance, in Illinois an employer is to reimburse an employee for necessary expenditures or losses during the employee’s employment if they are directly related to services performed for the company. In California, expenses for which an employee may need to be reimbursed include personal cell phone time on work-related calls. An employer should establish which business-related expenses may be reimbursed.
• Notice and posting requirements: Another challenge for employers with remote flexibility is that they still need to comply with notice and posting requirements for a worker who is off site. If the remote worker rarely or never comes to the office, the employer still must communicate employment rights. Electronic formats are an option, with required notices and postings included on your company intranet or even incorporated into your applicant tracking system. The U.S. Department of Labor (DOL) provides guidance for employers on federal compliance in this area but verify any state or local requirements.

2. Secure your sensitive information/technology systems. Ask yourself how secure your agency information and customer data is. Have you set up two-factor authentication for your log-ins? Do your passwords expire regularly and get updated? What else could you be doing to balance the need to safe-guard data while also developing a working environment that helps you attract and retain the best people?
   We work with agencies of all sizes at Frank Winston Crum—from large agencies with multiple locations to smaller, independent firms. Information security is a challenge for all of our clients regardless of size, but it is a partic-ularly sticky problem for our smaller partners. If you are a three-person shop and someone wants to work from home, that can become a struggle. And when workers remotely access the computer system to perform their duties, it opens the door to outside attacks. If you are going to allow people to work remotely, it is essential to secure the computer systems those remote workers will be using. The how-to list for securing your agency management system is extensive, but for smaller offices it would be a good start to simply learn about and implement rules around the use of a Virtual Private Network (VPN) by remote staff and the enabling of two-factor password authentication for added security. But be careful; you do not want to alienate your workforce by introducing a host of new, technology-driven procedures and ways of doing business and then not fully train the staff that must use these new tools.               Finally, consider purchasing cyber insurance, which has become even more important as businesses rely more heavily on technology. Your data is worth money and deserves to be protected.
3. Get creative about retention. Insurance agencies are set up in myriad ways. Sometimes the owner of the agency owns all the accounts that salespeople bring in, which means if the agent leaves, they leave their clients behind. In other cases, producers own their accounts and can take them with them if they decide to jump to another agency. No matter how an agency is organized, the fact remains that a great salesperson is always highly prized by their agency. There are not enough great agents to go around, and high performers tend to stay put because they are well compensated. One way to differentiate your agency, hang on to your talent, and attract top-level agents not currently looking to jump to a new job is to rethink agency splits. Traditionally, these splits have been used to motivate salespeople to bring in new business year after year, and to insulate the agency from loss of business should an agent decide to move on. As such, commissions on existing accounts often decline over time—earning the agency more money but decreasing the agent’s incentive to stay at the same time.             Have you considered basing commission splits on account size? Under a program like this (there are many variations), agencies pay higher commission percentages to producers on larger accounts—for instance, those over $100,000 in premium—versus smaller accounts.  This incentivizes the producer to go after larger revenue-producing accounts while also helping the agency generate larger profits per account.

What are you doing to get creative with the commission equation to motivate agents to stay put? Combining changes to the pay structure with quotas for new business can drive profits and retention at the same time. The trick is finding the right commission structure that works for the agency and the agents. Crunch your numbers. You might be surprised by what you find. n

Note: This story first appeared in the special, limited distribution “Florida” supplement to the June 2022 Rough Notes magazine.

The author

Andrew Widmaier, CLCS, CIC, is a commercial property and casualty insurance executive with more than a decade of experience in middle market agency and carrier roles. In Andrew’s current role, he develops and manages new and innovative casualty insurance products for Frank Winston Crum Insurance Co.