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The Ongoing Great Resignation and Its Impact on Employee Benefits

The Great Resignation!

You’ve seen the Great Resignation making headlines throughout 2021. But what impact does it have on the disability industry and the industries we protect? And does it show signs of slowing down or is this the new normal?

As we know, the changing demographics of any employer group impacts the company’s risk, need for coverage and premium rates. In this paper, we’ll examine why workers are leaving their employers, the impact that this change in the economy has on employers and our industry, and we’ll share thoughts on what carriers should be watching over the coming months.

The latest

Recent data from the Bureau of Labor Statistics (BLS) shows continued elevated rates of resignation in the U.S. While the early pandemic saw a dip in the quit rate trend as compared with the five-year pre-pandemic average (Jan 2015 through Dec 2019), the rate of voluntary quits has bounced back to a record high in November of 2021, which was nearly matched in March of this year1. See blue data in the chart below.

Notably, during the same timeframe, the rate of job hires experienced a similar growth rate, following the initial, more volatile period in early 2020. 

The highest quit rates in 2022 have been in the hospitality industry (accommodation and food services) and retail trade1.

  • Education Sector – 4.4% of all positions
  • Retail trade – 6% of all positions
  • Health care – Over 8% of all positions
  • Hotels and Restaurants – Nearly 9% of all positions

Industries with the lowest quit rates in recent months include government (non-public facing) and information services1.

The changing demographics of any employer group impacts the company’s risk, need for coverage and premium rates. Significant shifts in headcount and salaries must be considered when assessing risk.

Why are employees leaving?

Many employees were forced to slow down or stop working completely during the pandemic for various reasons. This situation created space for employees to reconsider their current jobs and level of satisfaction, allowing them time to rethink the importance of work/life balance as well as their career goals. Hire rates which essentially mirror voluntary quit rates in the chart above indicate that many employees did not necessarily quit working altogether, but rather switched roles to a career or company that may be more fulfilling in an effort to address work-life balance and long-term goals.

Many employees also retired early; however, a recent report from the Schwartz Center for Economic Policy Analysis indicates that the majority of these retirements were involuntary and followed a period of unemployment2. This helps explain why many who retired early, whether involuntarily or voluntarily, are now likely returning to the workforce. 

While the reasons for leaving a job will vary from person to person, some of the top reasons and their impact to insurance carriers include:

  • Opportunities – The job market is currently in a state of flux, presenting opportunities for higher pay and better positions. 
    Carrier impact: As companies compete for talent, a 5.9% increase in U.S. wages from 2020 to 20213 brings increased exposure for disability and life carriers in both coverage and premiums that are based on that exposure.
  • More flexibility – The pandemic changed normal work routines and opportunities for remote working arrangements. Flexible employers are seen as providing more attractive work opportunities.
    Carrier impact: Specific duties are changing. The underlying risk assumed at time of coverage inception may be changing and the underlying risk could be changing for the better or worse from a pricing standpoint. Renewals need to take any of these changes into account.
  • Burnout – Employees are exhausted with increased responsibilities and workloads over the past two years of pandemic-adjusted activities.
    Carrier impact: Burnt out employees are more likely to seek relief where they can and attempt a leave of absence in the form of a disability that otherwise may have just been a nagging pain.
  • Work-life balance – Many employees just want to take back their lives after so much uncertainty, embracing the “new normal”.
    Carrier impact: A focus on work-life balance has a less direct impact to carriers; however, the impact to general employment is spread across a number of variables – such as those leaving the workforce altogether to stay home with kids, those retiring, those switching to an entirely new career, etc.

 

Are the same jobs still available?

On another topic we discussed last year, Underwriting as Industries Evolve, employers have been incented to quickly integrate Artificial Intelligence and robotics in areas where staffing has been challenging. So, while it is still difficult to staff open positions, several jobs formerly staffed by employees may never be returning.

Many employers invested in robotics and have learned that they can replace these workers, with little or no incentive to bring back employees at all. Labor shortages also have further provided impetus to employ technology wherever “digitization of the workplace” can be shown to be productive versus employing actual human workers.

Examples include:

  • Supermarkets and other retailers began installing more self-service kiosks.
  • QR codes have been around for more than a decade, but their use during the pandemic has provided for the opportunity to eliminate service staff, as many restaurants and businesses have applied QR codes in this way.
  • The American Enterprise Institute recently referenced a jeweler that eliminated staff and replaced the sales process utilizing only QR codes and smartphones to order merchandise4.
  • Burger-flipping robots5 and self-service kiosks have been introduced in the fast-food industry, eliminating much of the human process.

Areas where it may have been too costly to invest in job-eliminating technology are now being revisited as the pressure to increase wages and benefits that would attract human workers escalates.

Overall, experts are divided when it comes to just how much robotics will replace the human workforce in the coming decades. According to Pew Research, 48% of experts surveyed predict that AI will replace a substantial number of jobs; however, 52% feel robotics will create more jobs than they replace, as humans continue to create new jobs and industries6.

 

Economic impact

As we entered 2022, mask regulations were dropped, and many areas of the economy appear to have returned to a semblance of normality. Yet, as we shared in this article’s opening, 4.4 million employees quit their jobs in April alone1.

During this period, as we look at the economy and employment, we see 325,000 new jobs were added in May, coupled with an unemployment rate of 3.5%, enabling an increasing number of employees to make moves due to the numerous opportunities available7. As previously shared, the need to fill positions has led to higher wage levels, fueling some of the inflation issues we are currently seeing in the supermarket and in retail.

As a result, the Federal Reserve is committed to continuing rate hikes in an effort to tame rising interest rates, where many Fed presidents have stated they will continue such increases until inflation is tamed8.

It is important to note that 2021 saw wages rise higher than any year in the past 20 years at a rate of 5.9%, while inflation rose 8.3% in April 2022 as compared with April 2021.9

As the Federal Reserve attempts to slow the rate of inflation, we do risk the potential that their actions could result in tilting us towards a recession. Carriers should be aware that employers may find themselves revisiting the employee benefits package they offer in an effort to reduce expenses. In turn, carriers can leverage today’s machine learning-based tools to encourage higher voluntary buy-ups.

We have historically seen these situations result in higher-than-expected incidence. Recessions can cause more claims as people are typically laid off in the early months of a recessionary cycle. We are already seeing an uptick in layoffs10 from employers who are anticipating a slowdown and reduced staffing needs, and employees will typically take advantage of all their insurance options before their employment comes to an end.

 

Impact to disability and employee benefits

As we look closer at high employee turnover and the impact on LTD incidence, carriers should exercise scrutiny as they underwrite the industries most highly impacted.

  • Health systems and first responders:
    Health workers were most exposed to COVID-19 and continue to experience high burnout and elevated levels of stress11. Across all specialties, 47% of physicians reported feeling burned out in 202112.
  • Hospitality and restaurant workers at all levels including waitstaff:
    The hospitality industry was one of the hardest hit during the pandemic and employers in this space continue to experience related challenges, such as labor shortages. Once-booming restaurants are being forced to reduce hours (and therefore profitability) while trying to attract workers who will remain loyal.
  • Other public-facing service positions, such as grocery store/retail personnel and airline employees:
    As many industries employing entry-level staff continue to be challenged by staffing shortages, retailers and airlines have replaced many service-related positions with self-serve kiosks. This trend is expected to continue, lowering the overall headcount for many employers.
  • Public-facing government employees:
    Government employees with direct public contact such as police, fire and first responders, and those working for transit systems saw their work stop and restart intermittently, creating job insecurity.

Despite being hardest hit by the pandemic, these industries have not yet experienced increased long-term disabilities as a result of the pandemic. Reliable data on the impact to short-term disability is questionable, given that, for many months during the pandemic, the industry experienced little guidance from federal agencies on diagnostic codes for COVID-19, leading to inconsistencies in capturing reliable data. According to the Integrated Benefits Institute’s 2020 Benchmarking Trends (available earlier this year), overall STD claims were down in 2020; however, claims coded for respiratory disease, infectious disease, and mental/behavioral conditions increased13.

The pandemic’s continual impact employment and the ripple effect on short-term and long-term disabilities are topics to be monitored and reviewed, as we will likely continue to see volatility and turnover in industries that ignore employee demands in the post-pandemic era. 

 

How can carriers effectively mitigate risk through a volatile labor environment?

From an underwriting and risk standpoint, carriers can seek to employ enhanced underwriting models to better reduce risk when pricing industries hardest hit by turnover and the pandemic. Today’s enhanced underwriting options employ methods that enable accurate pricing taking into consideration external factors beyond census data to better identify higher risk cases and to ensure pricing matches the risk.

Employers are implementing and actively identifying strategies to ensure they are retaining current employees and attracting new employees for the longer term. These organizations will likely be a better risk than companies that continue to experience high turnover.

So, what should underwriters look for when assessing companies as employers?

  • Insights from the census
    Reviewing employee hire dates for insights into turnover. Companies with many long-tenured employees could indicate a more satisfactory work environment, and therefore a better risk profile.  Of course, this is in conjunction with taking into account the years the company has been in business, the industry, and other factors.
  • Company culture research
    Researching an organization’s employment webpage and the “about us” section of job postings can provide valuable insight into the company’s culture and the value they place on retaining talent. 
  • Consider what the employer is doing to retain talent
    Is the company modifying employee policies and practices to help retain current talent and attract long-term, loyal employees?
  • Workplace flexibility – If the industry has demonstrated that hybrid or work-from-home models are successful, does the company offer this option?
  • Tools for the digital age – Is the employer keeping up with industry standards in terms of technology and digital tools to keep the company moving forward and to help retain forward-thinking employees?
  • Benefits and compensation – Does the employer offer a wide array of options when it comes to employer and employee paid benefits? Are their salaries competitive within their industry?
  • Diversity, Equity and Inclusion (DEI – Inclusion opens more of the workforce to an employer and increases employee satisfaction. Demonstrating these values helps attract and retain potential workers.
  • Skilling and reskilling – Does the company offer training? Are they investing in employees and providing potential opportunities for future advancement to encourage retention?

Companies who work to retain employees demonstrate they are working to mitigate one of the newest (and biggest) threats to their survival in the current environment. Conversely, companies that appear to be disengaged with efforts to retain employees and who are not working to reduce turnover should raise a flag to underwriters when assessing these groups.
 

Conclusion

The pandemic has had a profound impact on how and where we work, and efforts to integrate artificial intelligence and robotics continue to gain traction. How these changes impact employers through this post-pandemic period should be monitored closely. Continued diligence is crucial as we evaluate risk in this ever-evolving environment and identify the best approach to manage the claimants we insure.

Munich Re offers a variety of cutting-edge tools to leverage smart and connected data, embrace new ideas and technologies, and make confident decisions at speed and scale. Talk to us about how our optimized solutions employing predictive analytics, automated underwriting, and our digital partnerships can help carriers mitigate challenges and continue to grow their business as the employment environment continues to evolve. Contact us for more information.

Contact the Author
Matthew Clark
Senior Underwriting Consultant
Group & Living Benefits
Lynda Turgeon
Lynda Turgeon
Sr. Market Research Analyst
Group and Living Benefits
References Note: Some links may require membership to the publisher’s site. 1U.S. Bureau of Labor Statistics (2022). Job Openings and Labor Turnover Survey. https://www.bls.gov/jlt/ 2Schuster, B., Radpour, S., Conway, E., Ghilarducci, T. (2022, March 30). No “Great Resignation” for Older Workers – Mass Job Loss Drove the Retirement Surge. Schwartz Center for Economic Policy Analysis.

https://www.economicpolicyresearch.org/jobs-report/no-great-resignation-for-older-workers-mass-job-loss-drove-the-retirement-surge

3 Bruner, R. (2022, January 27). The Great Resignation Fueled Higher Pay – Even for Those Who Didn’t Switch Jobs. Time.com.
https://time.com/6143212/us-wage-growth-record-high/

4 Pethokoukis, J. (2021, September 6). Workers Fear Robots and Automation from Covid Are Here to Stay. But They Create Jobs. American Enterprise Institute.
https://www.aei.org/articles/workers-fear-robots-and-automation-from-covid-are-here-to-stay-but-they-create-jobs/

5 Dean, S. (2020, February 27). The new burger chef makes $3 an hour and never goes home. (It’s a robot.) Los Angeles Times.
https://www.latimes.com/business/technology/story/2020-02-27/flippy-fast-food-restaurant-robot-arm

6 Smith, A., Anderson, J. (2014, August 6). AI, Robotics, and the Future of Jobs. Pew Research Center.
https://www.pewresearch.org/internet/2014/08/06/future-of-jobs/

7 Associated Press (2022, June 3). Hiring might have slipped last month to a still-strong level. Politico.com.
https://www.politico.com/news/2022/06/03/hiring-might-have-slipped-last-month-to-still-strong-level-00036968

8 Cox, J. (2022, June 1). The Fed’s Mary Daly says rate hikes should continue until inflation is tamed. CNBC.com
https://www.cnbc.com/2022/06/01/the-feds-mary-daly-says-rate-hikes-should-continue-until-inflation-is-tamed.html

9Siegel, R. (2022, May 11). Pace of inflation eases slightly in April but still at 40-year high. The Washington Post.
https://www.washingtonpost.com/business/2022/05/11/april-cpi-federal-reserve/

10Munich Re’s monthly Re Con Report is available to our clients. Please contact Lynda Turgeon (lturgeon@munichre.com) for more information.

11The Physicians Foundation (2021, August). 2021 Survey of America’s Physicians.
https://physiciansfoundation.org/wp-content/uploads/2021/08/2021-Survey-Of-Americas-Physicians-Covid-19-Impact-Edition-A-Year-Later.pdf

12 Carbajal, E. (2022, February 21). 29 physician specialties ranked by 2021 burnout rates. Becker’s Hospital Review. 
https://www.beckershospitalreview.com/hospital-physician-relationships/29-physician-specialties-ranked-by-2021-burnout-rates.html

13Aller, J. (2022, January). 2020 Benchmarking Trends, Short-Term Disability & Long-Term Disability. Integrated Benefits Institute.
https://f.hubspotusercontent10.net/hubfs/8926463/Resource%20Assets/2020-Benchmarking-Trends-FINAL1.pdf

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