Mass Retirement for Boomers Adds Urgency to Insurance Talent Search

Organizations must rethink recruiting as the mass retirement of baby boomers creates a talent shortage for the risk management and insurance industries.
By: | March 19, 2020

The Risk Institute at The Ohio State University Fisher College of Business recently released data from its Fifth Annual Survey. Ninety-five percent of firms reported impending impact due to the mass retirement of baby boomers, with 60% saying it will have a high to moderate impact.

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Approximately 75 million Americans were born between 1946 and 1964, the most common parameter for the baby boom cohort. That means that the youngest of them are just 10 years or fewer from retirement age.

The mass retirement of an entire generation is looming on the horizon and will alter the American economy, workforce and general livelihood, the OSU survey found.

That situation will be exacerbated by two other demographic and economic factors. Because of smaller populations of younger generations as well as the Great Recession, many companies will not have enough younger workers with the experience to completely replace the retiring boomers, particularly in areas such as information technology (IT), finance and customer service.

That talent gap, in turn, can hamper a company’s overall effectiveness and bottom line. Businesses can protect their organizational health and bottom lines by approaching this workforce shift with a strategic mindset and developing a resilient risk strategy.

“This is such a critically important topic,” said Anna Beninger, global head of diversity & inclusion at AXA XL.

“The patterns of talent shortage are a screaming blinking light that there is a massive retirement bubble. There has to be a dramatic reconsideration of the type of talent that companies are seeking. It’s deeply concerning how poorly prepared organizations are to face this.”

The Talent Gap Brings Institutional Challenges

The challenge is not just demographic or educational, it is also institutional, Beninger elaborated: “There is a significant mindset change necessary” in recruiting and hiring.

Anna Beninger, global head of diversity & inclusion, AXA XL

“Organizations need to re-think recruitment. First, they need to be tapping a much larger talent pool. Those people are going to look different and have different experiences and perspectives. That is going to bring novel ideas,” she said.

Then from that larger talent pool, “They need to flip the script from thinking about how to weed out candidates to thinking about how to focus on transferable skills. That is, how can a person fit and help the organization. There has to be an appreciation of what the skills of the future look like.”

High on any list are interpersonal and leadership skills.

“Those are [as] equally important as technical skills,” said Beninger.

She noted that the next leaders will be those who are comfortable with technology, even if they are not the most tech-savvy people in the organization. What matters for leadership is if they can manage the human-machine interface.

Mass Retirement Will Hit Insurance Especially Hard

Beninger stressed that the risk management and insurance sector is among the most subject to that massive retirement bubble.

“Only 4% of millennials have evinced interest in the insurance sector,” Beninger noted dryly. “Our industry is not sexy. It’s very white and very male.”

Within her own company, Beninger says that new mandatory diversity recruiting and hiring guidelines have been instituted.

She noted that teachers as well as nurses and other medical professionals often start young and complete 20 or 30 years of service with many of the skills that make them excellent leaders and managers. Those fields are also mostly female and much more diverse than the corporate world.

It would take some training to bring a teacher or medical professional up to speed on insurance practices, but with their other skill sets already strong, “the investment would pay off.”

Almost all firms, irrespective of financial or non-financial, public or private, will be somewhat impacted by Boomers retiring, according to the OSU survey. Almost 60% of all firms will be moderately/highly affected, with this ratio reaching to 64% for public firms.

Within organizations, finance is the top function in financial firms, with 41%, while information technology is the top in public firms, at 36%.

The impact on IT might seem counter-intuitive, given that the field seems to be overflowing with millennials. But Phil Renaud, executive director of the OSU Risk Institute, noted that there tends to be a low rate of turnover in that field, which can hamper leadership development.

The Affects of the Missing Generation

He also noted the missing generation.

“There is a reverse bell curve with larger numbers at the ends rather than in the middle. That is because of the recession in 2008-11. Many companies were not hiring at all. They have made up the numbers since then, but they missed the window for developing the next generation of leaders.”

In terms of risk management, the demographic and organizational risks are not transferable. “These are enterprise risks,” said Renaud. “Companies cannot take out a policy to transfer the risk.”

The problem is multifaceted: “It is not just a question of where is the talent,” said Renaud. “It is not just a matter of finding and paying for the talent. There is also the matter of legacy operating systems at most companies.”

In many cases older operating systems work fine, and replacing them would be a major capital and operating expense to change them. If companies choose not to overhaul their systems, there will remain a need for a few boomers to stay in the workforce long enough to train their successors.

Companies are responding in a wide variety of ways, Renaud said. Some are consolidating their IT or financial functions to get the most utility out of the few managers they have.

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Others are moving those functions to smaller cities and college towns where there is abundant talent, and less competition than in bigger business-center cities.

Other firms are taking the opposite approach. They are hiring wherever they find talent, and having them work remotely as much as possible.

In some cases companies are simply farming out the functions to other firms. “That approach can create entirely new risks,” Renaud said.

“Outsourcing becomes a rapidly emerging risk that extends out to the nth party.”

The default approach, he added, was for organizations to try to retain boomers as consultants or in some part-time capacity. “In any case, the institutional risk, the enterprise risk, is the challenge for executives and human-resource departments how they are going to handle mass retirement.” &

Gregory DL Morris is an independent business journalist based in North Carolina with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

PART ONE: CRACKS IN THE FOUNDATION

Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.

PART TWO: BETRAYAL

As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.

PART THREE: FALLING DOMINOES

Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]