Drowning in Paperwork? Here’s How Staff Shortages are Hurting Your Agency’s Growth

Dec 30, 2024

The insurance sector is currently grappling with a notable talent gap that shows no signs of abating.

This shortage is driven by a combination of factors, including the post-pandemic Great Resignation, seeing around 57 million Americans switching jobs in search of better work-life balance and more fulfilling careers.

Another prominent factor is a noticeable lack of interest among younger generations in traditional sectors like insurance, as highlighted by a recent PwC report indicating that 21% of millennials prefer to avoid careers in financial services.

To add fuel to the fire, the impending wave of retirements sits like a ticking time bomb on top of the existing staffing shortage, with the U.S. Bureau of Labor Statistics predicting that nearly 400,000 employees will exit the insurance and insurtech sectors in the coming years.

These factors collectively suggest that the current staffing challenges in the insurance industry are likely to persist, placing increasing pressure on carriers in several critical areas.

Let’s explore what they are and how insurance outsourcing can help.

The Impact of Staff Shortages on Agency Growth

1. Increased Workloads Disrupting Internal Processes

One of the most notable effects of staffing shortages in the insurance industry is the increased workload placed on the remaining team members.

With fewer hands on the team, the tasks that once were shared now demand more attention from a smaller team, leading to disruptions in established operational processes.

This strain becomes a particularly prominent issue when it comes to manual operations.

Tasks like invoice processing and claims handling can consume hours of valuable work time each week, necessary to keep the revenue streams flowing.

Consequently, the amount of time spent in these critical processes demands existing staff to shift focus from other important aspects of their job role, something that can be curbed with business process outsourcing.

2. Retention Risks

Another critical consequence of understaffing in the insurance business is its effect on policyholder retention.

Overworking the existing workforce will lead to more errors in manual processes. Add to that the inadequate capacity of customer service representatives to effectively address inquiries, complaints, and concerns.

This will lead to delays, late payments, duplicate bills, and even cancellations due to non-payment, all of which contribute to frustration and confusion among policyholders.

Given the importance of financial reliability in insurance relationships, mishandling payments or delaying claims settlements can significantly impact policyholder decisions to stay or leave.

The resultant sub-par customer experience can lead to dissatisfaction, eroding trust and loyalty, prompting policyholders to consider switching insurers.

3. Challenges with Hiring and Retaining Talent

The challenges of recruiting and retaining talent, added to the gradually receding workforce, amplify the strain on existing staff members who are already stretched thin, covering operational gaps.

This situation not only impacts the workforce logistically but also takes a toll on their mental and physical well-being.

The talent shortage leads to increased workloads and consequent burnout, hampering productivity and accuracy and further leading to extended work hours — the classic Sisyphus effect is very prominent here.

For insurance organizations, preventing additional talent loss due to burnout is crucial.

Without effective business process outsourcing strategies to reduce the burden of manual tasks, insurers risk perpetuating this detrimental cycle.

Overcoming the Challenges of Insurance Staff Shortages

In an era marked by soaring policyholder expectations and dwindling staffing levels, insurance carriers face the daunting task of maintaining exceptional service amidst operational constraints that jeopardize retention.

The impact of staffing shortages isn't limited to understaffed insurers alone; even fully staffed carriers contend with overwhelming volumes of daily manual tasks. Increased manual work not only heightens the risk of errors but also diminishes the time available for critical initiatives and nurturing client relationships.

To navigate these challenges effectively, insurance companies must strategically leverage their human resources by opting for insurance outsourcing and automating manual processes, particularly those directly influencing policyholder satisfaction and retention.

Insurance Outsourcing as a Solution to Staff Shortages

In the face of persistent staffing shortages affecting numerous industries today, insurance outsourcing services emerge as a powerful strategy.

By outsourcing a part of the overflowing workload, insurance companies can reap several significant advantages, ensuring both immediate needs and long-term strategic goals are effectively met.

Some of the most notable benefits of insurance business process outsourcing are as follows:

  1. Swift completion of work by skilled professionals without delays due to the traditional recruitment process.
  2. Access to a global talent pool that expedites the onboarding of essential skills required to address operational requirements right away.
  3. Streamlined operations as a result of the strategic allocation of responsibilities to external experts, while internal teams can focus squarely on core business functions.
  4. Overall enhanced productivity and reduced errors due to overextension.
  5. Better flexibility in managing workforce dynamics, freeing insurance companies to adapt promptly to workload fluctuations and financial commitments associated with traditional hiring and layoffs.

These advantages of insurance outsourcing can help companies effectively mitigate the impact of staff shortages on insurance paperwork, inculcating resilience and efficiency in their operations.

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