The insurance industry is trying to shake off its dowdy image, but, says Christine Seib, it will never attract more graduates until it pays them more
Last year's Chartered Institute of Insurance (CII) conference in Edinburgh featured a careers fair, intended to encourage local university students to consider entering insurance. After the fair ended, one young woman, who was taking advantage of the free internet access provided by Groupama in the main conference area, was asked if she was considering insurance as a career. She looked incredulous. "Insurance?" she asked. "I only turned up because I thought the talks were on accountancy."
It is depressing to think that accountancy has a better profile than insurance. And that insurance can't convince the next generation that insurance is interesting.
It is bright enterprising people the industry needs to prosper and the lack of these people is driving wage bills, for bright people, well ahead of inflation.
So what could the industry do to attract high calibre young people?
Increase graduate pay is one answer. Stark figures from the Association of Graduate Recruiters (AGR) indicate that insurance does not pay. This view is supported by insurance recruitment specialist Robert Childs, who says the wage offered on most graduate recruitment programmes is much lower than can be obtained by applying for one-off vacancies.
Figures compiled by the Institute of Employment Studies for the
AGR show that insurance offers the second-lowest starting salaries of all industries open to graduates. Only six insurers - AXA, the Cooperative Insurance Society, Provident Insurance, Standard Life Assurance and two who chose not to be named - responded to the survey, so the industry's figures were combined with accountancy to form a more statistically reliable picture.
In 2000/2001, insurance paid on average around £17,500 to graduate employees. The companies predicted average graduate salaries would go up to about £18,000 in 2001/2002. The only industry that paid less was public services. Even the traditionally low-paid retail, hotel and catering industries paid more. This can be compared with legal services, which paid approximately £24,000, going up to £27,500. Banking and finance paid approximately £22,500, going up to £23,000, while electronic and electrical engineering companies paid about £22,000, rising to £23,500. Even those graduates determined to work in a business sector, yet not attracted to banking and finance, could look forward to at least £20,000, going up to £22,000.
Childs, a senior consultant at Joslin Rowe, says graduates can be paid anything between £17,000 and £25,000, depending on their calibre and the company's size.
But he adds that graduates who really want to get into insurance are realistic about their low initial earning capability, while those casting about for a "City" career of any kind often refuse to accept less than £25,000.
CII chief executive Sandy Scott disagrees, saying poor image is a greater problem than low salaries.
"Through the watchdogs, people are constantly being told we take the money and don't pay the claim, as in Independent, Chester Street, Drake and Claims Direct," he says. "They have built up an image that is in some ways unfair. No wonder, the bright kids look to the merchant banks, consultancies and the dot coms."
Scott maintains that the insurance industry "pays better than average".
It may well be that insurance has to deal with both issues if it is to recruit the young people it needs.
So what is the perception of insurance among those who are not
in the industry? Insurance Times took to the streets to find out what people really
think about a career in insurancethe image problem
Phil Smith, 32, banker
"To be honest, I never considered a career in banking, but I'm in it. I'm Australian and there are more insurance companies there than banks, but I'd have hated to have flogged insurance. Underwriting wouldn't have been too bad."
Rebecca Campbell, 20, human biology and statistics student
"I am not really interested in insurance. I am interested in working in the health care sector. I have never considered financial services. I would imagine it would be either a sales or management job."
Karen Smith, 18, sixth-form student
"When I think about insurance I imagine dodgy people trying to sell me insurance policies. It looks like a really boring job, phoning people all day long."
Andy King, 50, unemployed
"I am looking for a computer-related job - that is what I was doing beforehand. I would not think there was much call for my skills in the insurance industry."
Andy Robinson, 42, banker
"I never considered insurance because of the perceived boredom factor. The perception is the man from the Pru, knocking on the door. I pictured insurance workers as glorified chartered accountants, but then I would have thought banking was boring back then too."
Helen Shelbourne, 20, a recent graduate
" I have just been made redundant from my first job so I am looking to do something different. I would not think I was qualified to work in insurance."
Sue Thorp, 49, unemployed
" I have applied for a number of jobs in the industry but I have not been successful. "
The insurer's view: change is a must
It seems like a century ago, but do you remember all the fuss over the millennium bug?
It is of particular relevance to those who work in the insurance industry, whose public image is dire enough to bring solace to estate agents and double-glazing salespeople.
Having feasted on tales of a forthcoming apocalypse in 1999, the media then asked if the whole thing had been a hoax. It concocted a theory that, since the Bug had failed to bite, all the money spent on nullifying the threat had been wasted.
That is the kind of knucklehead attitude the insurance industry faces. We underpin the financial wellbeing of individuals, households, businesses, industries and even economies. Our products are competitively priced and reasonably serviced. Yet we are portrayed as greedy and uncaring. We are viewed as passionate about collecting premiums yet reluctant to pay claims.
This has to change.
Let us remind ourselves of how important our industry is. According to the Association of British Insurers (ABI), the UK insurance industry employs 340,000 people - around a third of all financial services jobs. It contributes £8bn to UK overseas earnings and accounts for more than a fifth of investment in the stock market. The general insurance sector pays out £41m a day in claims.
But we are not making big money. In 2000, we made an underwriting loss of £4.5bn.
Let's acknowledge our weaknesses (and learn from them). First, we have only recently started to improve how we treat customers, but we have a legacy of mistrust to overcome to persuade people we do not object to paying valid claims.
Second, there's the language issue. We've made great strides to improve matters, but we still cling to arcane and confusing terms. We cannot expect broad acceptance until we remove this barrier to communication.
Third, we must end any suggestion of roguery or incompetence. Each time a high-profile insurance company folds, the whole industry takes a hit. Regulation from without will help, but only improvements from within will be effective.
It is time to take the initiative. After the storms and flooding in 2000, we performed superbly and not just in terms of paying out £1.3bn. We ran 24-hour operations, mobilising tradespeople and ensuring policyholders were made comfortable.
Now, let's concede that we did no more than our job, but it's not unrealistic to expect some appreciation. Even when the industry announced, via the ABI, that it would continue to provide flood cover for most domestic properties and small business policyholders for two years, we were given no credit.
We must convince insurance buyers that higher premiums are sometimes necessary and justifiable. Service must be impeccable, products must be sensibly priced, and press relations proactive. But the biggest responsibility falls on the industry.
We need to appoint and support people who can represent our views in a positive fashion. We can either decide we will always be unpopular or try to find a solution. Surely we can make things better?
Despite image and pay problems, insurers are still investing
time and money in graduate schemes. We take a look at Royal & SunAlliance's
The recruiter's view: more understanding required
Kerry Powell has been Royal & SunAlliance's UK graduate recruitment and development manager for six months. She has previously recruited graduates for Pricewaterhouse-Coopers (PwC), Marks & Spencer, Iceland and Cable & Wireless
What do graduates look for in their first job?
Graduate research findings show that the three main ambitions are to work in consultancy, marketing and the media. Graduates opt for the glamorous stuff, but they don't understand what titles like consultancy really mean. PwC changed the title of one of its jobs from tax officer to tax consultant, and the application numbers increased, although the job was no different
Is the lack of a glamorous image the biggest problem for insurers when recruiting graduates?
I'm doing a master's on employer branding. From that I've learned that a big issue is that graduates do not know much about insurance. They don't appreciate the size of the clients that companies such as R&SA have, for example Halifax, our biggest account. They don't understand the industry well enough to see the value in working with such companies.
What can insurance learn from other traditionally "unsexy" industries?
You would think accountancy was a similarly difficult area to get young people interested in because it is not very sexy, but accountancy has managed to use the high profile of the Big Five firms to acquire an image. People know they won't stay at PwC, they won't necessarily want to be an accountant for the rest of their lives, but they value the training and the profile of the clients they see.
How has R&SA attempted to make insurance sexy?
We rebranded last year to create a more high-tech perception in people's minds and to focus on the graduate scheme and the business areas. We created a website and a brochure that we sent to universities. The next step was to get into the major career publications and advertise in national publications.
Has it worked?
In the past three years, we have lost only two people, who were disciplined over a particular issue so we've had no voluntary turnover.
What are the salaries for insurance graduates?
Insurance is a medium-quartile payer, higher than accountancy, more like most of the retail schemes. R&SA's starting salary is £18,000. A lot of graduates have unrealistic expectations. Because they hear what consultancy and investment banking can pay and because they have student debts, they often expect £25,000.
What are the stumbling blocks the industry still needs to overcome to attract more graduates?
When we put our graduates through the ACII exam, they say it is behind the times. If we could raise the profile of the qualifications and make it more business relevant, it would help. The other thing we have to look at is how we can educate young people about working in insurance.
The graduate's view: needs to be fun and dynamic
Nick Hankin started R&SA's graduate recruitment scheme in 1995. He completed the scheme and left the company in 1999 to become an assistant property insurance manager at AXA
Is the insurance industry's image as unattractive as recruiters fear?
Insurance had a poor image when I started work at R&SA and it has an even worse image now. This is probably because the market for graduates has become more competitive. It was damaged in the late-1990s by how insurance companies treated their staff and the career opportunities they offered. Other industries, like investment banks, glamorised themselves a bit more and made a harder play for graduates. Insurance is still regarded as dull and the rewards are not seen to be as good as in other industries.
Did you know anything about insurance before joining R&SA?
I did a history degree then looked at consultancy, banking and insurance but
I'd done some research on insurance and knew a few people who worked in it, so
I was leaning that way.
Did you enjoy the graduate recruitment scheme?
I probably enjoyed it a lot more than most of my peers. I really wanted to do the job because I'd had a gap between university and starting the programme so I was motivated and I felt comfortable within the industry and within R&SA. There was a lot of scope to carve my own way.
Yet you left soon after the scheme finished. Why?
Things were stagnating. I came off the graduate training scheme, which is always quite difficult because you're at a stage of having a lot of potential but no track record and credibility to take on a middle to senior management role. It's a horrible gap period and I don't think R&SA knew what to do with people in that position. It had invested a lot in the initial two years and then it was back-pedalling. I was doing a job I liked but it was a bit of a dead end so I moved to AXA.
Was salary an issue?
The R&SA scheme was in the mid to upper quartile for graduate pay and I progressed well through the scheme. However, as with the other issues, there wasn't any meaningful change in remuneration when you completed the scheme and your ACII, so it was fairly easy for AXA to offer a better package.
What could the industry do to help overcome its image problems?
There's a lot of support for the ACII but the difficulty is in translating that back into value for the company. Companies also need to recognise who genuinely adds value to the organisation, then retain them. There need to be more rewards and recognition. I think they need to try to make it more fun and dynamic.