Talent management and succession planning

in the European insurance industry

about spencer stuart

Spencer Stuart is one of the worlds leading executive search consulting
firms. Privately held since 1956, Spencer Stuart applies its extensive
knowledge of industries, functions and talent to advise select clients
ranging from major multinationals to emerging companies to nonprofit
organizations and address their leadership requirements. Through
50 offices in more than 25 countries and a broad range of practice
groups, Spencer Stuart consultants focus on senior-level executive
search, board director appointments, succession planning and in-depth
senior executive management assessments. For more information on
Spencer Stuart, please visit www.spencerstuart.com.

About the Spencer Stuart European Insurance Practice

Spencer Stuart conducts senior-level executive searches, board director
appointments and human capital assignments for a wide range of
clients within the European insurance industry. Our consultants, many
of them with years of senior-level executive experience in the insurance
industry, have access to more than 15,000 insurance executives
worldwide and are knowledgeable in key areas that are critical to many
companies, including product management, alternative distribution,
offshore operations, risk and capital management, and governance.
We conduct assignments in the Broking, Life, Property-Casualty and
Reinsurance sectors.

Our research into attitudes and approaches to talent management

and succession planning involved a series of in-depth interviews with
senior executives from 15 leading insurance companies in Europe. The
themes emerging from these discussions are developed in this paper.
The companies we talked to range from brokers to primary insurers to
re-insurers. Although these businesses differ from each other in many
respects, in this study we set out to discover how the wider European
insurance industry is approaching the twin challenges of talent
management and succession planning, and to what extent companies
are preparing for a future in which securing top-flight leadership skills
and experience will be critical for their long-term success.

Contents
Introduction
Approaches to succession planning and talent management
Competency models and performance measurement
Balancing technical expertise with broader business management skills
Building a mobile, global talent pool
Diversity in the European insurance industry
The value of job rotation
External benchmarking
Rewarding people for developing talent
Who is responsible for succession planning and talent management?
Conclusion

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Participants
Spencer Stuart European Insurance Practice members

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Talent management and succession planning in the European insurance industry

Introduction
Talent management and succession planning go hand in hand.
Managing talent is about providing opportunities for people with the highest potential in an
organisation to learn, develop, gain useful experience and progress in their careers. It means
stimulating and retaining the people who are destined to play a major role in the future of the
organisation.
Succession planning is about the identification and development of future leaders. This task
is made much easier where talent has been well managed. After all, the right successors are
unlikely be found inside an organisation where the talent has not been properly nurtured and
developed. Succession planning forces an organisation to look closely at its talent, develop
reliable assessment procedures, and ensure that they are applied systematically across the board.
In most European insurance companies, formalised talent management and succession
planning processes have been introduced relatively recently, i.e. within the last five years. Based
on comparable studies we have conducted in other parts of the financial services industry and
in consumer and technology businesses, it is clear that the insurance industry lags beind other
industries in this respect. But even for those that have been active in this area for some while,
getting peoples attention and doing it right remain a challenge.
European insurance companies are starting to recognise the value of talent management and
succession planning, although in many cases there appears to be a substantial gulf between
intention and reality. Many good programmes exist, but do they deliver?
Rolling out a succession plan across an organisation usually involves significant cultural
change, and the insurance industry finds it harder than most to embrace such change. There
is evidence of excellent programmes in place and there is plenty of innovation; but there is also
conflict between progressive ideas and some of the more traditional, conservative approaches
that resist the performance-based analysis and appraisal procedures necessary for creating a
meritocracy.
Finding potential successors being able to replenish and enhance leadership from within
requires discipline, sound processes and commitment from all levels of the organisation.
The impetus and framework need to come from the top (this is not always apparent), but much
of the effort takes place at grass roots level. In the next section we look at some of the efforts
being made to introduce best practice into European insurance companies.

Approaches to succession planning

and talent management
Most companies have prioritised their succession planning by giving greatest emphasis to
the top two layers of executives. The executive board of one major company reviews its top 50
positions a mixture of senior functional roles and business leaders as often as quarterly.
Succession planning has to be driven from the top. Its purpose is to ensure that a pipeline of
talented individuals is in place.
Many companies are only now beginning to build talent management programmes for high
potential middle managers and junior staff. Among the businesses we spoke to, the number of
high potentials being tracked varied hugely, from as few as 30 to as many as 1,400 in one of
the larger companies.
The most interesting and dynamic programmes reach right down through the organisation,
identifying promising talent from senior managers to recent graduates, and seeking
opportunities to develop that talent.
We are focused on continuity and longevity.
One company uses its organisation and development review as a mechanism for identifying
areas in which it needs to excel, what the implications are for leadership, and where those
leaders might be found. Both immediate and longer-term succession issues are examined, and
a range of information is maintained on key prospects, such as career moves to date, perceived
strengths and weaknesses, language ability, and mobility. People are force-ranked based on a
range of performance criteria.
Previously succession planning meant having nice talks with nice people; now we take care of
the succession of over 150 people all over Europe in key functions.
Companies categorise their high potentials in different ways. One has four grades (including
one for specialists whose skills mean that they are unlikely to move into general management
roles). People in the junior grade are, wherever possible, placed in generalist roles early in their
career and given stretch promotions. People in the higher two grades are given individual
development plans and offered tailored coaching. A second company first looks at key
succession areas, then assesses people in terms of timeframes and their readiness for positions
in 02 years, 24 years and 47 years. It has created a series of development programmes
to accelerate individuals and move them up in a shorter timeframe. A third company has
identified a raw talent group to ensure that it does not overlook its outstanding junior staff.

Talent management and succession planning in the European insurance industry

It is all about training, self-discovery and learning.

One of the hardest challenges is identifying talent early and giving people significant roles
or at least meaningful projects or development activities. This sometimes means moving
someone senior, which can be awkward. So, the challenge is not always about identifying an
internal candidate when there is a vacancy, it is about creating a vacancy in the first place.
I think its quite likely that in five years time the leadership profile will be very different, and in
any case I dont think that leadership is a fixed concept.
At the heart of any talent management or succession planning programme there has to be
a clear understanding of where the company, and indeed the industry, is going. It stands to
reason that the business strategy will determine what kind of people the company needs in the
future and where they may be found.
Leadership is not a fixed concept as in other sectors, insurance business models are
changing. Companies are diversifying into new geographic markets, for example China,
Russia, India and Eastern Europe; a variety of new strategic partnerships are evolving; and
there is a significant increase in off-shore and outsourced activities. All these factors increase
complexity and change employee profiles. They call for the introduction of new management
skills. Flexibility is essential companies with the ability to identify these new skills and
develop their talent accordingly will have a competitive advantage over their competitors.
I am a great believer in saying that the process doesnt make it good what really matters is
the quality of the discussion and the actions that are taken.
Talent management and succession planning initiatives have to deliver results or they will lose
support. Insurance companies have to contend with the reality that assessment procedures
are often unpopular or applied inconsistently, the evaluation of individuals can be highly
subjective, transparency may be lacking, and processes perceived as bureaucratic.

Competency models and performance measurement

Most companies we talked to operate competency models, managing them entirely in-house.
These vary in sophistication; some are specifically designed as an internal leadership
assessment tool, others are fairly generic. Not all are linked to succession planning, although
they often feed into training courses that are devised to fill competency gaps.
The CEO wants to change the business and its culture: We will need new type of managers. As
a result, the leadership competency model will be revised.
Competency models are usually directly influenced by strategic plans, but not in every case,
which is surprising. Competency models designed to evaluate managerial and leadership skills
tend to be fairly mature and consistently applied, but technical competencies (in actuarial and
risk areas, for example) rely on other methodologies to capture performance achievement.
Annual appraisals (increasingly 360 degree appraisals) are becoming more common, although
these are not at all popular, especially among brokers. Increasingly, bonuses are being linked
directly to appraisals as companies relate compensation models more closely to competency
and performance issues. That said, succession planning is not always linked to the competency
model, and more could undoubtedly be done to connect the two.

Balancing technical expertise with broader business

management skills
Until very recently, company culture focused more on technical rather than managerial
content of executive roles, as often happens in this industry.
The combination of general management and technical skills is highly sought after in the
insurance industry. The changing pace and shape of insurance is putting a premium on
business and managerial competencies. While technical roles (e.g. risk, finance, actuarial)
remain critical, there is no question that increased emphasis is being placed on the
development of managerial skills.
One company that has traditionally focused on retention and remuneration is now turning its
attention to development and management. It has undertaken to train the top 500 executives,
mostly managers and some brokers, on leadership and the inner workings of a business.

Talent management and succession planning in the European insurance industry

Building a mobile, global talent pool

If we had built this requirement into our talent management four or five years ago we would
not have the difficulties that we have now.
Within larger, international companies, there is a widespread recognition of the importance of
building an international talent pool that is capable of meeting the challenges of an expanding,
increasingly global business. Perhaps inevitably, nationally based insurance companies are less
interested in developing international talent.
Global functions in particular require a global approach to developing talent. Many companies
keep track of who may be suitable to take up cross-border appointments. Indeed, individuals
who are interested in and available for overseas postings are at a distinct advantage when it
comes to joining the high potential talent pool in some companies.
There is an international talent pool, but mainly for junior managers at international
subsidiaries. Our goal is to implement a plan for an integrated strategy for all domestic and
international employees.

Diversity in the European insurance industry

The insurance industry may not have been an early adopter of diversity policies, but the issue
is now being addressed across the board. There remains a shortage of women in leading
positions, although there is less gender imbalance at more junior levels. However, with the
outsourcing of many back office roles, one company admitted that 90% of its remaining
workforce is white and male.
In terms of diversity we have an equal match of men and women but not an equal
distribution in seniority. We have a culture of very long hours and that does not suit all
women.
Cultural awareness is increasingly on the agenda and diversity is included as a topic in our
leadership academy programmes which is the training ground for our top people.
Producing broader candidate lists is on the agenda of most companies, but efforts to improve
race and religious diversity are generally less advanced than gender diversity. Promoting and
hiring on merit is the norm, with affirmative action rarely practised in the European insurance
industry. As one participant commented: we stretch promote people according to whether

they can do the job, not in terms of positive discrimination, but we are mindful that we have to
manage candidates carefully.
There is only one woman in a top management position, despite the fact that 60% of our
employees are female.
When looking at making internal promotions, we always try to have a womans name on
the list.
One company, frustrated with the finite talent pool within insurance, recently hired a number
of bright people from outside the industry, particularly from law and consulting firms. Within
a year these new recruits had gained a good grasp of insurance and were starting to make a
serious contribution, bringing with them welcome energy and a fresh perspective. In their own
way they had brought with them some diverse thinking into their new organisations.

The value of job rotation

Insurance companies are still the domain of barons and godfathers. We are moving people
across some geographical/functional boundaries, but not a lot and certainly not enough.
Job rotation is generally recognised as a positive, desirable thing for some companies it is a
prerequisite for taking on senior roles. Job rotation is most common in the first decade of an
insurance career, after which people generally become far less mobile than in other industries.
Having encouraged people to move around the organisation it is important that they return to a
more senior role.
Secondments an alternative to job rotation, and a good way to give experience to high
potentials can be expensive to arrange. Business unit accountability can make it difficult for
people to move around the company, and more conservative managers are often loathe to let
good people go. Such attitudes will need to change if insurance companies are to retain and
develop talented individuals for the long-term benefit of the organisation.
Our businesses are like silos currently. We could benefit from rotation. But I dont believe
in top-down planning for people. Id rather know the talent pool and make sure that internal
candidates are brought forward between business areas when a position has to be filled.
We are putting in place a more formal and effective mentoring programme.

Talent management and succession planning in the European insurance industry

External benchmarking
As we have seen, changes in the financial services industry, and particularly in the insurance
sector, are forcing companies to revise their business strategies, often taking them into new
and unfamiliar territory. Sometimes a company is unable to supply all of its leadership needs
from within, and is left with no option but to look outside.
Even if a company believes that it is self-sufficient in terms of talent it is often regarded
as essential, when a succession event occurs, to benchmark internal candidates against
competitors and an even wider potential talent pool.
The insurance industry traditionally tends to stick to its own
Recruiting for brokers is more of a wine bar scene.
However, external benchmarking appears to be the exception rather than the rule for insurance
companies. Few have a screening or assessment model for potential external candidates, and
systematic benchmarking of the competition is extremely unusual. One person told us that
he will occasionally meet high potential people from outside the organisation on a speculative
basis, whether there is a job or not but this is a long way from systematic benchmarking.
This lack of external benchmarking may result from the strong sense of self-sufficiency that
permeates many insurance companies. In some instances this might be characterised as
complacency or even insularity.
In the broking industry we have been very myopic and very incestuousour sons and
daughters marryand people remember favours dating back decades or generations.
Insurance companies prefer to make internal appointments when possible, looking outside
only when subsidiary and/or parent companies have not turned up suitable candidates.
External hires tend to be more common in financial and other functional roles.
External consultants are occasionally used to validate internal promotions (for example,
combining psychometric testing with in-depth interviews). However, looking outside the
organisation for potential recruits is noticeably less common than in other industries.
We are much more about internal mobility rather than looking outside. However, for
functional roles we can be more external.
We actively try to avoid cannibalisation in the industry it just increases pay-levels.

The creation of specific talent pools tends to be reserved for very senior positions only, and
inclusion in such a pool can involve a tough selection process based on a set of leadership
competencies.
External talent pools are developed in a less formalised manner, often as a result of networking
and building professional relationships in the market. On the whole, insurance companies do
not keep target lists of companies from which they seek to recruit.
We are much leaner than we were, which does reduce opportunities, and the demands on
senior people are much broader. An internal oversupply can lead to frustrations which need to
be managed.
Static employee populations in some companies can make them a recruiting ground for other
organisations, which makes talent management schemes all the more important.

Rewarding people for developing talent

This is a deficit. We still have a substantial number of people who think talent belongs to
them and not to the company.
Few companies issue financial or other incentives to employees for developing people with
talent or contributing to succession planning programmes. Those that acknowledge the value
of rewarding people for developing talent have yet to incorporate this into the assessment
process.
The incentive we have regarding succession planning is that people will not sit in a meeting
with the chief executive with no plan in front of them. Peer pressure is helping in this regard.
Top management is being rated on the number of talented people identified who would be
available for other parts of the company, and those willing to go abroad.

Talent management and succession planning in the European insurance industry

Who is responsible for succession planning

and talent management?
I wrote a paper with ideas about talent development and got management to agree it before
I joined.
We have a short-term mindset in the industry and long-term planning is lacking strategy. In
five years here, I have effected more change than in the rest of my career put together. A lot of
further change rests on HR becoming more professional, less supporting and a more actionorientated function.
Many of the HR people responsible for implementing succession planning and talent
management schemes in insurance companies have brought their expertise, along with a raft
of new HR policies, from other sectors. While it is clearly desirable to get succession planning
right to create continuity and long-term stability in an organisation, a judicious injection of new
ideas from outside the sector can have a positive impact especially in an industry that has a
tendency to be rather insular.
Strategic HR was not always at the top of the senior management agenda. Recently I have
been given a clear mandate to establish competency inventory, competence development,
management assessment, and management development programs. Well see in a year how
enthusiastic the business is.
The companies with most effective succession planning and talent management programmes
tend to be those in which the CEO and top management are driving the agenda. This is true of
every industry, but in the relatively staid world of insurance the inspiration must come from
the very top for such programmes to achieve their full potential.
In multinational companies which are often more progressive in this area, both talent
management and succession planning are viewed as the shared responsibility of HR and the
line. The best results are to be found where the CEO, HR team and business leaders are equally
committed to managing talent and planning for leadership succession.
We have a culture in which the bosses are involved in the businesses and no-one sits in an
ivory tower. I know significant details about the businesses and know who the stars are three
layers down.

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Conclusion
We could do better at retaining people. We lose people before they get a sense of what life
could be like if they stuck around.
Many strong talent management and succession planning programmes have been developed
by European insurance companies, but there is a long way to go before most companies catch
up with best practice outside the industry. During the next few years, companies will need
to consolidate what they have in place already, and take their programmes deeper into the
organisation for their long-term self-interest.
As the insurance industry becomes more global and business models change, a talent pool will
have to evolve that is capable of meeting the challenges facing the industry, one that reflects the
global diversity and cultural breadth of its customers.
There has been a noticeable change in the European insurance industry towards a more
meritocratic environment. Many excellent programmes are in place throughout Europe, but
they have not yet had a lasting impact. It is critical that insurance companies push ahead with
the implementation of their human capital programmes, while maintaining a close eye on best
practice outside the industry, so that they are receptive to new ideas, innovative solutions and
fresh talent.
Innovation and creativity are going to be at a premium. We can expect to see more and
more non-insurance people on the executive board, most likely from other financial services
companies.

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Talent management and succession planning in the European insurance industry

Participants
We would like to thank all those who gave their time to participate in this survey. They included
senior executives from the following European insurance companies:
AIG Europe (UK) Ltd
Allianz SE
Aon Ltd
Aviva plc
Barclays Insurance

ERGO (Munich Re Group)

Eureko B.V.
If P&C Insurance
ING Group N.V.
Prudential plc

RAS SpA
SEB Trygg Liv
Fondiaria-Sai SpA
Swiss Re
Willis Group Ltd

Spencer Stuart European Insurance Practice members

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Andrea Pecchio rome

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Henrik Engsner stockholm

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Bertrand Richard paris

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t +44 (0)1.53.57.81.41

Christine Johnston london

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Ger Scholtens amsterdam

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David Juster london

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Armen Simon frankfurt

asimon@spencerstuart.com
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2007 Spencer Stuart.
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