The talent crunch

The captive insurance management and consulting industry—and, to a certain extent, the insurance and risk management industry—is facing a significant challenge that has been developing over the last decade: a shortage of accountants.

While this discussion will focus on captive management and consulting, the overarching issue includes the insurance and risk management industry more broadly, due to the increased need for financial and analytic skills in the evaluation of risk and risk-financing structures.

Above that, the accounting profession is facing a significant shortage of accountants—the pool that the management and consulting industry typically draws from.

For years, accounting was considered a “safe” option, where one could make a very good living and maintain professional stability while having a defined career path. However, it’s never been considered “sexy”.

As a greater need for professional affirmation has developed alongside an ever-growing push for improved work/life balance, people have turned away from the accounting industry because it has been perceived as having an overly rigid structure.

Younger generations have sought more immediate promotions and advancement. Accounting, and particularly public accounting, have always been perceived as industries where you put in your time to earn your next promotion. While the accounting industry has started to adapt, the perception issue still exists and is a significant challenge.

Another fundamental issue has been the change in how mathematics has been taught in schools. There has been a fundamental shift towards teaching “process”, as opposed to developing logic skills.

Non-accountants are probably cringing when they read this, but consider algebra. When generation X were in school, they weren’t taught a process to solve an algebraic equation. We were taught the rules and how the numbers and letters interrelated, but were then left to apply those rules the best they could to solve the equation—this educational approach develops logical thinking in the brain.

The change in focus to teaching process has left mathematics (a foundational component for accounting) to be less interesting or devalued, some might say.

There are short- and long-term issues which need to be addressed. While some management firms in the captive insurance industry have moved towards outsourcing their accounting work to offices in unrelated companies—or even other countries—these options come with their own challenges.

The outsourcing of work can create a significant disconnect between the details of a captive’s transactions and the main point of contact for the client at the management firm, resulting in poor response time with questions or comments. Since some firms have outsourced to other parts of the world, the time differences are also worth noting.

In any event, the industry needs to become more adaptable to the marketplace by adopting remote work environments—COVID-19 has shown us this can be effective. We also need to better demonstrate career opportunities within our organisations and industry, as well as proactively identifying those team members who demonstrate a desire and aptitude for the consulting side of what we do.

Firms with significant brokerage operations need to make their teams aware of opportunities outside the captive practice—whether they be broking, production, actuarial/analytics or other consulting opportunities. As we move forward, the best producers will have a strong risk-financing base and be more consultative as the world of risk financing continues to evolve.

In the short term, we need to be more flexible, with team members working remotely. In addition, it’s important to be more willing to accept non-accounting colleagues (with other relevant education or experience). Another option, particularly for larger firms, is to provide more opportunities for accounting personnel working in other parts of the organisation.

Most significantly, in the long term, we need to change the perception of accounting. A concerted effort is needed at pre-college level to educate potential students about the significant career possibilities that accounting can bring—the foundation of any successful business is its financial basis.

According to the Bureau of Labor Statistics, 20 percent of small businesses fail within the first year and 70 percent fail within 10 years of startup. This is relevant, as every successful businessperson needs a level of financial understanding to succeed.

As more potential accounting graduates are brought into the fold, there needs to be an improvement when it comes to making them aware of our industry and what it means.

Consider that many captive clients are Fortune 500 and Fortune 1000 companies—in most careers you simply cannot get high-level exposure to such esteemed businesses. In many cases, when there is discussion of a captive, that is going to at C-suite level.

The opportunity exists to become a valued advisor to large, complex organisations. In short, the captive management industry provides unique and interesting opportunities that one may never otherwise get to experience.

With the changing world compounding the talent shortage, captive management and consulting firms need to adapt more quickly while continuing to deliver the highest level of service to their clients. It is a tricky balance in the short term, but if we don’t focus on the long term we may find ourselves in a far more challenging environment than we are in today.

Pete Kranz is captive practice leader at Beecher Carlson. He can be contacted at: pkranz@beechercarlson.com