Insurance industry increasingly relying on external workforce

The insurance industry – like most others – is increasingly relying on outsource providers and gig workers, but few insurers have a holistic workforce strategy that also incorporates its internal workforce, according to SAP Fieldglass’ study, “External Workforce Insights 2018: The Forces Reshaping How Work Gets Done.”

On behalf of SAP Fieldglass, Oxford Economics surveyed 800 senior executives, including 51 insurance executives in more than a dozen countries, and found that about 43 percent of workforce spending in the insurance industry goes to contingent workers and services providers. While 78 percent of the insurance executives polled say their external workforce is critical to operating at full capacity and meeting market demands, only 20 percent of the respondents say they strongly agree that their organization has a talent strategy that encompasses employees and the external workforce.

Related: How employers are adapting to the ‘new normal’ of talent recruitment

“The rapid growth of the external workforce is one of the most important business stories of our time, with far-reaching implications for both employers and employees,” the authors write. “Yet most companies — insurers included — are still figuring out the best ways to manage this extended workforce, and C-level executives are not paying close enough attention. Those who manage external labor effectively say it drives competitive advantage, yet others risk being left behind.”

The insurance industry’s external workforce includes technology consulting firms and call center outsourcers, and non-payroll labor such as data scientists, programmers, financial analysts, and claims adjusters, according to the study. The most widely used method of accessing external talent for insurers is services providers (69 percent), followed by sourcing talent themselves (59 percent), staffing agencies (35 percent), on-demand, online marketplaces for freelancers (51 percent), and alumni networks (16 percent).

“These channels are expected to show strong growth over the next three years, suggesting ongoing, and even increasing, demand and competition for external workers,” the authors write.

The main reasons why insurers use an external workforce is that the practice provides the flexibility to respond to opportunities when and where they arise (49 percent), and nearly half (47 percent) say their external workforce helps them compete in a digital world.

But it’s not just about the hard numbers, according to the study.

Insurance executives mostly report positive cultural benefits from the external workforce including challenging employees to do their best work (67 percent), improving their culture by bringing in people with different backgrounds and experiences (65 percent), and raising the bar for employees by bringing in new sources of skills and talent (63 percent).

Less than half say the external workforce creates uncertainty among their full-time workforce about job longevity and pay levels (43 percent), and dilutes their culture (35 percent).

“Maximizing the value of the external workforce calls for thoughtful and effective management,” the authors write. “This includes training and educating these workers, and integrating them into the company culture.”

There are a number of external workforce management challenges, due in great part by a lack of visibility of just who exactly comprises the workforce, according to the report. Most (82 percent) insurance executives say that finding high-quality resources at the right time and in the right place is really or extremely challenging.

There are also financial issues. Forty-one percent (41 percent) of insurance respondents report overcharges and payment redundancies — higher than the cross-industry average of 33 percent; 39 percent say they have experienced unauthorized spend without approval of procurement (the cross-industry average is 28 percent); and 35 percent have experienced digital security breaches (the cross-industry average is 31 percent) as well as physical security breaches (35 percent, just under the cross-industry average of 37 percent).

A quarter (25 percent) have had to deal with compliance issues, and quality issues regarding resources and/or projects (24 percent). However, insurance executives report lower than average rates that deviate from an agreed-to rate card or master services agreement (18 percent versus the average of 25 percent), and late project delivery, missed milestones, or incomplete work (14 percent versus the average of 18 percent).

“How can that visibility be improved? One solution may lie in technologies like advanced analytics and machine learning, which can give companies better insight into their external workforces,” the authors write.

Insurance executives are ahead of the cross-industry average in their use of data and analytics to inform their workforce strategy (76 percent versus 68 percent cross-industry), understand the effectiveness of particular talent strategies (51 percent versus 48 percent cross-industry), and their use of predictive analytics to inform workforce scenarios (55 percent versus 53 percent).

Insurers are also ahead of the cross-industry average when it comes to using AI/machine learning to anticipate talent shortfalls. However, the insurance industry is on par or behind the industry average in other uses of predictive analytics and AI/machine learning.

Considering that external workforce sources are “critically undermanaged,” C-Suite leaders at insurance companies must get more involved if companies want to take full advantage of the asset for agility and future growth, according to the report.

“The key question for every business is this,” the authors write — “Shouldn’t the same rigor you use to manage your internal workforce be applied to your external workforce? In other words, shouldn’t the external workforce be on your C-suite agenda?”