How insurance heavyweights are slashing jobs to cut costs.
A number of insurance industry heavyweights have announced large scale redundancies in recent months, and the alarming news for employees in the sector is that other insurers and brokers are set to follow their lead. The latest Chartered Institute of Personnel and Development/KPMG labour market outlook survey – published this week – concludes that recruitment activity in all industries, including the insurance sector, is falling, while the number of staff being laid off is set to increase. The research showed that, of the 1,221 employers surveyed – approximately 10 per cent of which were in the “finance, insurance and real estate sectors” – a total of 27 per cent were planning redundancies in the third quarter of 2008.
However, the blow will be softened somewhat by the news that more than one in four (29 per cent) employers said they expected to increase staff levels this quarter. But any optimism regarding recruitment levels should be tempered by the fact that this is the lowest proportion of employers planning to boost staff numbers during the third quarter since the survey began four years ago. In 2007, a total of 38 per cent of employers were planning to increase their employee numbers in the third quarter, while, in 2006, 43 per cent of employers had pledged to boost staff levels in the July to September period.
The recent culls at Axa and Marsh show that the sector’s leading players are occupied with thoughts of laying off staff rather than taking on new employees. Last week, Axa confirmed that it expects to make up to 500 redundancies as part of its company restructure. Meanwhile, in May this year, Guy Carpenter, the reinsurance division of Marsh and McLennan said that it would make 350 employees, or 15% of Guy Carpenter’s global staff, redundant and Marsh followed with the announcement this week that up to 900 jobs were to go.
One of the reasons why insurers are laying off staff is that markets are generally softening, and, as a result, margins are narrowing. The insurance sector can respond to tightening margins in a number of ways – it can raise prices or cut costs. However, as Standard & Poor’s explained in its recent report on the European insurance sector, insurers’ ability to raise prices is “market-dependent”, and so, unfortunately for insurance sector employees, cost-cutting is the option being taken by an increasing number of companies.
