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The Need for Talent Strategies During M&As in the Insurance Industry

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A recent report shows that some of the trends currently defining the insurance industry include the acquisition of weak firms by stronger enterprises, as well as the consolidation of existing assets in order to expand operations and strengthen market position. In general, the focus of acquisitions lies on acquiring firms that are good cultural matches and whose products integrate well with existing offerings and are tailored to specific geographies in order to improve return on equity.

Insurance Journal states that in the U.S., the insurance sector is primed for M&A opportunities because the sector is currently highly fragmented. To illustrate, companies with less than $10 million revenue per year control more than 40 percent of the insurance industry’s total revenues, creating a fertile setting for larger companies looking to consolidate and expand by means of acquisitions.

Meanwhile, according to The Lane Reportfor smaller, independent insurance agencies that are prompted to sell or merge with larger enterprises, reasons can vary from market pressures and an inability to navigate an increasing amount of regulations to the high expenditure of running a business and business owners simply reaching retirement age and looking to offload their assets.

How M&As affect talent strategies

Though products and geographic market presence can be main motivators for M&As, it should be clear that acquiring human capital is an equally important aspect. That’s why one of the most important questions during an M&A is whether and how to integrate an acquired company’s workforce. Unfortunately, in some cases, layoffs can’t be avoided. Yet with the current high demand for talent in the insurance industry, as well as the skills gap, it stands to reason that it’s usually more effective to hold on to existing talent than to look for replacements. Experienced workers with a good understanding of the industry should be considered assets that contribute significantly to the overall value of an enterprise. For example, especially when an M&A serves to solidify an enterprise’s position in a specific region, retaining the existing workforce can mean preserving longstanding relationships with consumers. It can also offer an opportunity to capitalize on the acquired company’s established reputation in the community.

Of course, the upheaval surrounding an M&A calls for careful adaptation of talent strategies in order to retain existing employees. While for employers, M&As are business arrangements based in facts and figures, for employees, they’re often confusing, emotional, and uncertain times that can result in loss of engagement and productivity. That’s why it’s important to adopt strategies that provide clarity surrounding the M&A process, as well as take measures to engage employees and boost productivity.

In all of this, HR plays a vital role. From the very beginning of the M&A process, HR departments are best advised to collaborate in order to create talent strategies that provide employees with clarity and—when possible—security. These strategies also need to address cultural integration of acquired employees in order to motivate, engage, and retain them for the long term.

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