Addressing the talent crisis in the insurance industry: Does investment in employee relations pay off?

The US insurance industry is facing a critical talent crisis that demands immediate attention. Utilizing a specialized reporting requirement, our study delves into US property-liability insurance companies' investments in their employee relations and evaluates the influence of these investments on their financial outcomes. Our study reveals a positive correlation, with a standard deviation increase in investment (USD 4.18 million for an average insurer) correlating with a 0.36% rise in return on assets and a 1.10% rise in return on equity. Various tests, including a difference-in-differences event study, validate these findings. Additional tests demonstrate that benefits slightly diminish at higher investment levels but remain significant. Smaller, less capitalized insurers gain the most.