In series - Lloyd's & London market: Please mind the gap

The skills shortage remains a major concern for the London market — but emerging evidence suggests the fight for talent has begun.

eptember’s Chartered Insurance Institute Skills Report could be, to adapt a football cliché, research of two halves.

The first half presents a degree of pessimism, revealing concerns about developing skills shortages, and the second provides reasons to be positive about the development and retention of talent in the industry.

A cursory glance at the study reveals that this dichotomy is most notable in the London market. Some 80% of CII London market faculty members believe there is a shortage of skills in key areas of their businesses — a 17% increase on 2010 — and, considering new entrants joining the sector, 6% fewer feel they are of similar quality to five years ago with 4% believing the new staff are worse.

London market respondents believing the skills shortage is having a detrimental effect on business has increased by 12% on last year to 89%; a percentage shared only by CII members in the underwriting faculty. In addition, more than 60% suggest the shortage is causing the UK market to fall behind other countries, with a similar number fearing for the future of London’s world-leading position.

However, there are signs the sector has acknowledged the skills issue and is steeling itself to fight the war for talent and, critically, to protect its worldwide 
competitive position.

The report reveals that almost 60% believe the London market is doing enough to encourage professional qualifications and education – up 13% on 2010 and almost 10% ahead of CII members’ experience overall. In addition, around 80% believe the issue of training and skills is “on the boardroom agenda” while the London market outstrips every other insurance sector in its commitment to staking a claim on future talent through offering internships and work placements; the latter a source of welcome surprise.

There is, of course, a widely held belief that the age profile in the market means the number of people with the necessary expertise is continually reducing. In the longer term, the ageing workforce will only have a detrimental effect on performance, despite the perceived current progress being made by the London market.

A double-edged sword
But, in this particularly international market, talent comes as a double-edged sword: it is both hard to gain and easily lost. Outstanding skills come at a premium but are also extremely mobile, with the scramble to retain well-qualified people arising in competing overseas locations.

The Centre for the Study of Financial Innovation’s Insurance Banana Skins survey this year featured talent as a significant industry risk for the first time, demonstrating the heightened competition for staff that also arises from India, the Gulf and Singapore. The risk of the London market being left behind in the skills race is a very real issue.

If the market is going to retain its position as a global leader, it needs to address the skills issue — but how seriously is the problem being taken? Collectively, there may still be a question mark but the level of support for CII initiatives such as Discover Risk, whereby individual firms work with the CII to attract new talent to the industry from an early stage, is a positive sign.

Equally, the level of London market commitment to the Aldermanbury Declaration — a voluntary agreement made by insurance firms to improve professional standards — has been manifest.

Ultimately, addressing the skills gap is about recognising the risk – collectively as a sector and as individual companies — and then investing in the workforce, while promoting careers in the London Market generally. A concerted effort must be made to reach the student body and gain a bigger market share of the available talent; insurance, historically, has been poor at doing this when compared to the usual suspects among other professions, namely law and accountancy.

However, attracting highly capable people into the industry is linked to the wider reputation of the sector and portraying it as a place to work that has both status and self-esteem. The requirement to change external perceptions among the young and talented, therefore, remains paramount.

The advantage the London market has is its distinctive nature: the attraction of working for global businesses and dealing with a variety of risks; but its traditional approach of recruiting by word of mouth, amid today’s competition for talent, may not be enough.

Focus on internships and placements
The sector has gone some way to addressing this with its focus on internships and placements. The fact that nearly 80% of CII London market members are currently offering opportunities to school leavers or graduates is particularly encouraging.

And, though difficult to measure, the market’s approach to developing a diverse pool of talent reflects its place in a global market where any sensible, modern business leader would be looking to draw on the best people available.

It’s reassuring that skills development is firmly on the boardroom agenda and executives are backing it with pounds and pence: 46% of London market members are promising to target their training budgets more effectively – 13% more than across all CII members.

The war for talent has only just begun, and the London market is well placed to emerge victorious – but only if it continues to make the required investment.

David Thomson is director of policy and public affairs at the Chartered Insurance Institute.

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