Addressing a shortage of qualified commercial underwriters

Nicholas Hudescu is a rarity in the insurance industry.

The 23-year-old attended Wilfrid Laurier University, earning a Bachelor of Business Administration degree specializing in insurance and risk management. While there, he joined the student-run Laurier Insurance and Risk Association (LIRA) club, and eventually became president.

“I discovered an opportunity for my first co-op; it was in financial lines underwriting and that’s how I learned about this specific niche,” said Hudescu, now a financial lines underwriter at TruStar. “It’s kind of history from there. I really liked it.”

Competition to find insurance coverage for clients in some commercial lines has been fierce for the past few years, but some say that doesn’t compare to the intensity of the industry’s war for talent — especially in commercial underwriting.

“We’re seeing a lot of demand for intermediate level to senior [commercial underwriters],” said Stefan Rolfe, associate director of insurance at Impact Recruitment. “Insurance is just in steady growth mode. That’s through all positions, and underwriters are no different.”

Regarding commercial underwriters in particular, the industry is low on supply, said Wes Gray, associate vice president of commercial solutions for Sovereign General Insurance’s eastern region. “There’s a deficiency, certainly, in the mid-market commercial underwriting world with having experienced, qualified staff.”

Part of that is because a large swath of the industry has retired in the past few years. And about 8.5% of the insurance workforce plans to retire in the next five years, with almost a third of those retirements (32%) happening within two years, according to the Insurance Institute of Canada’s (IIC) Demographic Research Series 2022-2023.

For its study, IIC surveyed HR professionals at 26 Canadian P&C organizations, representing more than 44,000 employees and 34% of the industry’s workforce. Nearly two-thirds of survey respondents identified an urgent need to recruit commercial lines underwriters and expect it will be very difficult to retain those employees in the next two years.

As Rolfe put it, “the ratio of demand to people coming into the industry is off.”

For insurers, candidates for an underwriting position who can be trained in a commercial niche but already have underwriting skills are invaluable.

“In the marketplace, looking for qualified individuals has been a challenge. Certainly, some marketplaces have been more challenging than others. But nonetheless, finding experienced underwriting talent is top of mind for most organizations these days,” said Gray.

Why is the need for commercial underwriters so acute?

Commercial lines recruitment barriers

Commercial clients typically present more complex, challenging risks to underwrite than personal lines customers. It can take time to develop the skills to address commercial risk and be a hands-on problem solver.

For example, the risks faced by a national timber facility and local craft brewery are starkly different. And underwriters can’t develop knowledge about these coverage nuances overnight.

“It takes time to learn the complexity of risk assessment and exposure recognition,” Gray said.

“We could be providing $30 million in capacity, so we need underwriting abilities that can adequately assess that exposure, and price the risk accurately in order for us to provide appropriate products for our brokers and clients.”

But the industry is undergoing a significant loss of underwriting expertise, knowledge and resources, which makes placing business harder than ever.

“We rely on underwriting talent to grow and make underwriting decisions for us,” added Gray.

Underwriters are responsible for the terms and conditions of the policy, and for the pricing, too. Without the right talent, firms run the risk of producing policies that don’t meet clients’ needs, jeopardizing their reputations and losing customers.

“If you don’t have qualified, experienced staff in the mid-market space, you could be doing your clients a disservice, because maybe there’s a limitation or clause in the policy that [denies the client coverage],” Gray said.

“Profitability of the organization can be really challenged if we’re not identifying and underwriting exposures properly, or [if] we don’t have a policy tailored in such a way that we can cover the risk properly.”

This story is excerpted from one that appeared in the October print edition of Canadian Underwriter. Feature image by iStock.com/ArtMarie