Major players like Farmers and GEICO are cutting back their workforce by 11% and 6%, respectively. What’s going on? The headlines alone might evoke a sense of dread, but a deeper look into the pressures driving the cutbacks reveals the potential for emerging opportunities. A behind-the-scenes look into how insurance companies are pivoting suggests that it’s change, not doomsday, that’s underway.
The State of the Industry
An Exodus from California and Florida
Climate-related disasters have companies pulling out of California, Florida, and other weather-impacted states. The list of companies leaving these states is long and growing steadily.
It’s not just small companies that aren’t weathering the storm. Big names, including State Farm and Allstate, both announced their departure from homeowner lines in California after record-breaking losses. Even with homeowners insurance rates increasing an average of 42% for Florida homeowners, major players like Farmers are still departing from the state.
Companies Dropping Entire Lines
Citing losses resulting from catastrophes and inflation, SECURA announced its exit from personal lines not only in some states but altogether. They aren’t the only ones leaving the entire category. State Auto, Oregon Mutual, and others are announcing their departure from personal lines and into other commercial and industrial areas.
Major Layoffs Industry-Wide
In 2023, Farmers cut 2,400 jobs — 11% of its workforce. GEICO eliminated 2,000 positions and Liberty Mutual cut 850 jobs. From big brands to insuretechs like Hippo that laid off roughly 20% of its employees, the cuts are undeniable.
CEOs cite several drivers behind their decisions, from restructuring to improving efficiency to automation to re-evaluating product offerings.
Simultaneous Layoffs and Retirements
Not only are companies cutting, but natural attrition also has the workforce shrinking industry-wide. Property Casualty 360 states that 50% of the insurance workforce will enter retirement by 2028. The National Association of Mutual Insurers calls it the “retirement cliff,” predicting that over the next 15 years, more than 400,000 open positions will be left unfilled as talent ages out of the workforce.
Related: Attracting Young Talent Into the Insurance Industry
Hope Behind the Headlines: What’s Taking Shape Behind the Scenes
With each company announcement, consistent themes are emerging. It’s clear things are changing, and they’re changing as a result of clear and present pressures.
The cutbacks aren’t in question. Where assumptions are being made is in what this all implies about the health of the industry. The industry itself is solid and arguably in more demand than ever. Beyond the headlines are not indications of a takeover by AI or a disappearing market but rather something more optimistic.
Correcting After Major Economic Changes
AM Best said the layoffs are likely cyclical rather than structural — in other words, fluctuations driven by the business cycle rather than changes that render current employees’ skills obsolete or that replace jobs with automation. With AI dominating the headlines, there’s a temptation to conclude that artificial intelligence is replacing people, but AM Best cautions that it’s too soon to tell.
Let’s not forget our tumultuous recent past, where a global pandemic and record-breaking storms hit hard. With the COVID-19 pandemic officially behind us, we’ve entered the market correction stage as the industry attempts to normalize after a sudden and dramatic wave of change.
Moving Into New Lines
Risks associated with climate change, technology, and inflation are all front and center today and have companies reassessing their product offerings to address them. Companies are changing how they do business and the type of business they do. Insurance companies are restructuring. It’s not necessarily from a place of fear and lack, but from a need to create and provide risk management products for a changing world.
As societies and industries evolve, so do the risks we face. Cybersecurity is a real threat to people and businesses today. Specialty lines such as agribusiness and farm lines are emerging into the mainstream as climate change steps into the spotlight for weather-dependent industries.
Re-Evaluating Underwriting in a Changing World
The entire purpose of the insurance industry is to insure against risk, not run from it. While companies may be pulling out based on a lack of profitability based on their current underwriting algorithms, that doesn’t mean they or others are gone for good. The very presence of risk itself is precisely where insurance is needed.
Where there is risk, there is a need for insurance. Behind the scenes, companies will work to refine their underwriting to meet the current and changing needs — and they need talent and professionals to do that. Where there is a gap in the market, there are opportunities for new companies with more effective underwriting to emerge, and they will. The need for personal home and auto lines does not disappear when companies leave; it grows.
Streamlining Processes
All of these changes present opportunities for companies to create and improve processes for efficiency. Efficiency doesn’t necessarily equate to job loss and lack of opportunity. Efficient, well-functioning businesses are profitable and healthy businesses. Today’s more efficient and streamlined companies are also some of the world’s leading employers. They create positions where people have a purpose, know their value, and know exactly how their efforts impact the company they belong to.
These changes aren’t something that seasoned talent needs to wait idly for until someone else manifests them. During the restructuring process, it takes talent to create, build, and operate a winning company. There is opportunity in every stage of change.
Key Takeaways
Current statistics don’t necessarily reflect future outlooks. While the Bureau of Labor Statistics reports that hiring by insurance carriers and related companies slowed to an estimated 1,100 positions in October, the future outlook is bright. A Labor Market Study showed that 65% of property and casualty insurers plan to boost staff numbers, and 72% of insurance companies expect to grow their revenue in 2024.
Bottom line: When an industry shifts, there’s room for opportunity. Insurance isn’t going anywhere. By its very nature, the presence of risk drives the need for insurance at all. Companies with new approaches to underwriting have an advantage in this new landscape.