What Can Be Done About Turnover in Third-Party Administrators?

I recently attended the National Workers Compensation and Disability Conference and repeatedly heard one major complaint from the third-party administrators (TPAs), “Turnover is a major issue for us!”

Odd, as I hear from clients almost on a daily basis is, “I want to leave my TPA because of the adjuster turnover.”

Why is this happening? Why are turnover rates in excess of 25% for some TPAs? What are the solutions, if any, for both clients and the TPAs?

What Do You Mean by Turnover?

First, it is important to define “turnover.” Many of the TPAs thought that their competitors play games with their definition of turnover rate, thus suppressing the true number of adjusters leaving the firm.

Quite simply, turnover to me is the percentage of adjusters on board last year that are no longer on board today. Several TPAs exclude counting retirements, parental leaves including maternity, leaving to join another industry, terminations, right-sizing (planned turnover), and workforce reduction due to lost business. The way TPAs calculate turnover is a clear as mud.

Turnover to me is the percentage of adjusters on board last year that are no longer on board today.

Why Are The TPAs Experiencing Turnover?

Let’s face it, being an adjuster is not a glamorous job to some. It can be a stressful job, long hours, packed with emotional interactions, in a multi-tasking environment. Despite these challenges, TPAs pay a fair wage, offer good benefits, provide a stable working environment, and an individual can make a career in claims.

I think we need to explore the demographic makeup of the adjusting staff at most TPAs. Clearly, some of the turnover is due to the aging workforce. However, the “boomer generation” is not the major age group of the TPA’s adjusting staff. The current workforce is composed of the millennials. Millennials possess the following characteristics:

  • Millennials are multitasking pros and can juggle many responsibilities at once.
  • They are easily distracted and find social media and texting hard to resist.
  • Millennials need to feel that what they are doing is important and that they are on the right track. (Yes, it sounds a little needy—and it is. But, many Millennials grew up with constant praise from their Baby Boomer parents. It’s what they know.)
  • Millennials aren’t as willing as former generations to sacrifice their personal life in order to advance their careers. They like to “work hard – play hard.”
  • They expect a more flexible work environment.
  • Millennials are extremely team-oriented and enjoy collaborating and building friendships with colleagues.
  • Millennials want to feel like they have an open and honest relationship with their manager and co-workers.
  • Millennials want to know that they will have the opportunity to advance and develop their careers within the company they choose to join.

Millennials don’t sound all that bad. Frankly, they sound like my kids.

But how do they fit into a structured environment of a third party administrator? This is something that the TPAs are not blind to; however, they’re having difficulty finding solutions that will retain the Millennial TPA adjuster.

Perhaps, we can’t socially engineer the millennialism out of the Millennial, but what can be done? The TPAs all stated that the Millennials workforce is a challenge, and they’re trying to change their workplace to retain this current generation of their workforce.

What TPAs are Doing to Appeal to Millennials

Here is what we heard from several TPAs:

Roamers

“We’re keeping a staff of 50 adjusters that ‘roam’ and quickly takeover a claim pending if an adjuster leaves.” That is a corrective action that I applaud, but this is more like a treatment for the problem, not a solution to why turnover is happening in the first place.

Flex-work

“We’re allowing proven adjusters the opportunity to flex-work, three days in the office, two days at home with flexible work hours.” This is a great idea, and I’m sure many Millennials (and other generations) like this.

However, working at home isn’t necessarily what the Millennials want. They want to work with a team, interact, build, create, and feel socially connected to their workplace, much like they want to have 1,000 close friends/followers on Facebook/Instagram/Twitter.

Salary

“We’re increasing pay”. Wow. Do we think that increasing pay will cause the Millennials to become 20+ year employees? I’ve heard stories that Millennials will leave to their next employer for $500 or $1,000. Also, I’ve heard that some TPAs will offer $5,000 to $10,000 signing bonuses for experienced adjusters.

Keep in mind, the Millennials want more than money, they want a flexible work atmosphere, they want to interact, they want praise, they want a defined career path, they want to participate, and they want to know what they’re doing is important. Sure, money helps, but I don’t think it’s the “golden egg” of the solution.

Keep in mind, the Millennials want more than money

Retention Bonuses

Some TPAs are offering frequent bonuses on a monthly or quarterly basis when the adjusters meet specific KPIs. This meets the Millennials’ need for constant praise that they got from their Boomer parents. Still, several of the TPAs do this, so if they all do this there is no differentiation from TPA to TPA.

Office Amenities

TPAs are also changing their workplace structure, creating more team rooms, creating areas outside of the office for meetings, and trying to “Googlelize” their workplace. I’ve always wondered how appealing working for an insurance company is compared to a technology company in Silicon Valley.

I’m not saying we need to have sliding boards, Ping-Pong tables, and X-Box rooms at an insurance company, but I have yet to see an insurance carrier/TPA office that looks different from the insurance carrier I worked for over 20 years ago.

TPAs are offering benefits like free coffee, free lunches, gym memberships, and other perks to entice the Millennials.

Adjusting Targets

One TPA noted they are no longer looking for the “A” student. The “A” student wants to be CEO tomorrow. They are now looking for the “B” student.

Screening

TPAs are also conducting more pre-employment psychological testing to focus on hiring employees who will be dedicated, will be more patient, and will have the mental/emotional intelligence skills required to perform the job.

Group Hiring

One TPA is hiring adjusters in groups and is experiencing lower turnover rates when they hire in groups. Remember Millennials like social interaction and by building relationships at the onset, it could lower turnover.

Compensation

I think we need to explore the compensation issue further. My personal feelings in what I’ve seen in the industry are that wages have been very stagnant over the past 5-7 years. During the lowest points of the recession, raises were almost non-existent. As our economy fell, so did manufacturing and so did workplace injuries and pending claim files. This created the need for fewer adjusters, thus with fewer jobs, the need for adjusters fell, and the wages remained stagnant.

With fewer jobs, the need for adjusters fell, and the wages remained stagnant.

With the economy generally better over the past few years, injuries started to increase, pending claim files started to increase, and TPAs found the need to increase their staffs in proportion to the expanding economy.

Meanwhile, healthcare costs in America continued to increase as did the costs of many consumer goods. Healthcare deductibles and personal contributions to healthcare costs have increased dramatically over the last 5-7 years. The adjusters, with far less disposable income than some professions, saw stagnant wages with higher healthcare costs and high living expenses.

Healthcare deductibles and personal contributions to healthcare costs have increased dramatically over the last 5-7 years.

Now, enter the Millennial wanting to start a family and buy a first home. It’s very difficult for the Millennial in today’s world to aspire to what previous generations have achieved, due to stagnant wages and rising living expenses. What’s a Millennial to do if another TPA/insurance carrier offers a $10K signing bonus and a $5K raise? They leave.

I think the focus is on the Millennial’s attributes/characteristics too much. Sure they may want a flexible and positive environment, but they aren’t that much different than other generations: They want to be able to live a good life, balance work/play, and feel valued. I think they’re really struggling to live like previous generations and running into more economic barriers than previous generations.

What’s a Millennial to do if another TPA/insurance carrier offers a $10K signing bonus and a $5K raise? They leave.

What to do

What can employers do when they are having constant turnover with their TPA? First, realize this is an industry issue and TPAs are concerned about their high turnover rates. There is not a single TPA blind to this issue.

Employers should define what “turnover rate” means to their TPA, and find out what is included in “turnover rate” and what is not included. Employers should question their TPA on what the TPA is doing to retain Millennials.

Employers should define what “turnover rate” means to their TPA.

Employers may also indirectly be contributing to the stagnant wage issue. Employers demand that their claim service contracts are limited to 3% per annum increase. With rising healthcare costs and adjusters needing annual wage increases, this doesn’t leave much room for TPAs to adequately compensate their adjusting staff.

One TPA allows clients to fund a TPA-administered “pool” of additional funds to be provided to adjusters that perform well and achieve certain KPIs/metrics. I really like this approach…if you have the “A Team” and you want to keep them, why should an employer not be part of the solution?

Employers demand that their claim service contracts are limited to 3% per annum increase.

The Millennials are here to stay…at least for another 30-40 years. Like all generations, the Millennials have unique characteristics with unique challenges. On the negative side, they’ve been described as lazy, narcissistic, and prone to jump from job to job. They’ve also been dubbed as “trophy kids”: kids who always got their participation trophy.

On the positive side, they are multi-taskers, team players, tech-savvy, open-minded, and self-expressive. These are all great traits in the properly designed environment.

Your TPA is aggressively attempting to engineer a new workplace culture for the future.

The next time you experience adjuster turnover, remember, you are not alone. Your TPA is keenly aware of the issue. Your TPA is aggressively attempting to engineer a new workplace culture for the future. The grass may not be greener in terms of turnover with another TPA. This is a systemic issue in this industry, and it will take time and require creative solutions to resolve.

About Joe Picone

Joe Picone is Claim Consulting Practice Leader in Willis' Risk Control and Claim Advocacy Practice, with more than …
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