Innovation
Insurers Cozy Up to Remote Work and Reduced Office Space

• Lori Chordas
• March 2021
• 

At the beginning of 2020, roughly 20% of Liberty Mutual's staff had been working remotely several days a week. But after COVID-19 began to hard hit the U.S. in mid-March, causing business and school lockdowns, the insurer was suddenly forced to temporarily dim the lights in many office buildings and transition nearly its entire workforce into virtual work arrangements.

Liberty Mutual isn't alone. Last spring, companies like Aetna, Farmers Insurance and others moved employees—some for the first time—to remote work arrangements. Some opted to make that temporary shift into a more permanent fixture. This shift in work arrangements also has prompted some insurers to examine the possibility of shedding office space.

During the height of the pandemic, nearly 75% of chief financial officers said they expected some segments of their workforces to permanently work from home even after COVID-19 is gone, according to a March 2020 Gartner survey. And for more than half of larger organizations across various industries, reducing the size of their office space because of the rise of remote workforces could soon become a reality, Cisco Systems Inc. reports.

Rapid Shift

Just weeks into the pandemic, Nationwide Insurance successfully pivoted to a work-from-home environment for 98% of its employees.

It also decided to accelerate a multiyear plan already in progress to close satellite offices and permanently transition to a hybrid operating model that comprises primarily working from the office in four main corporate campuses and working from home elsewhere.

Spokesperson Ryan Ankrom said Nationwide completed its exit of most buildings outside of the four designated campuses last November and moved associates in Gainesville, Florida; Raleigh, North Carolina; Harleysville, Pennsylvania; Richmond, Virginia; and Wausau, Wisconsin to permanent remote-working status.

Over the past year, corporate juggernauts like Facebook, Twitter and Microsoft also have announced that they will be allowing many employees to work remotely even after the pandemic—creating the potential need to turn what was once bustling office spaces into prime real estate for sale.

Morgan Stanley projects over the next two to five years, vacancy rates in office buildings in San Francisco could reach 7% to 9% and 10% to 12% in New York.

In another metropolis, Portland, Oregon, Standard Insurance Company's nearly 3,000 employees transitioned from working in the city as well as in dozens of offices around the U.S. to largely working from home since mid-March 2020. Last August, the company made the decision to temporarily relocate a small number of essential employees working from two downtown Portland office buildings to several suburban buildings to ensure their safety in light of continuing safety concerns and property damage occurring in downtown Portland, said spokesman Bob Speltz.

Downsizing Plans

The ongoing pandemic has many in the C-suite re-examining real estate needs and deciding whether to reduce brick-and-mortar space as a consequence of what many call the “new remote reality.”

In a survey conducted by KPMG last August, 68% of large company CEOs said they plan to eventually downsize their office space.

Steven Chirico, a director at AM Best, said while he hasn't yet heard of many insurers reducing their physical footprint as a result of the pandemic, he expects that could change during upcoming lease renegotiations—with some opting to sell unused office space and others looking to sublet space they no longer need.

Long before COVID-19 grabbed headlines, the number of telecommuting Americans was climbing steadily, with a 159% rise between 2005 and 2017, according to a FlexJobs and Global Workplace Analytics report.

Now, in the midst of the pandemic, the once nice-to-have benefit has suddenly shifted into a must-have for many organizations. It also has opened the eyes of company executives to the advantages that come from virtual work arrangements, including increased productivity, greater collaboration, lower overhead costs and a better work-life balance for their staffs.

State Farm is finding increased “flexibility” from virtual work arrangements and last year announced employees in operations centers in Birmingham, Alabama; Murfreesboro, Tennessee; Austin, Texas and several other locations will “no longer physically be reporting” to those centers even after the pandemic, said spokesperson Tammi Estes.

For employees in its Bloomington, Illinois headquarters, along with its Atlanta, Dallas and Phoenix facilities, Estes said State Farm plans to return more of them to the office later this year in what she called “a careful and thoughtful” phased approach.

Employees across all sectors are embracing the recent shift to work-from-home arrangements, welcoming—even if just temporarily—the opportunity to say goodbye to long daily commutes and being tethered to their desks for countless hours in exchange for Zoom meetings and the flexibility that comes with remote working.

According to McKinsey research, 80% of employees enjoy working remotely, and 41% report being more productive.

Insurance employers, too, are recognizing the value, with 82% of insurance chief human resources officers surveyed by Accenture in July 2020 finding high workforce productivity from virtual work arrangements, and 88% citing workforce engagement was high during the pandemic.

Along with overhead cost savings from rent, utilities and other monthly expenses that companies can gain from downsizing their physical footprint, AM Best's Chirico said virtual work arrangements also are creating new opportunities for insurers to deepen their talent pool, especially across different geographies.

In the aftermath of shelter-in-place mandates issued during the early days of the pandemic, Allianz Global Corporate and Specialty “literally overnight” transitioned 90% of its workforce into a work-from-home environment, said head of distribution Rani Christie.

One year later, many of its employees are still working remotely, “and even with the few offices that we have open, it's still only 10% to 15% capacity,” he said.

Now, as companies slowly start to “resurface from the deep end of what is COVID,” Christie said he expects many to find continued success in the “new normal,” despite several drawbacks that can arise from that environment, including employees feeling isolated from their peers, at-home distractions and space issues.

However, when companies weigh the pros and cons, he said, “now somewhere in between, we have the opportunity to strike the right balance, and that balance could be beneficial on an individual level, who maybe prefers to work from home or maybe prefers to work from the office.”

Returning to a New Reality

In the coming weeks, Liberty Mutual plans to invite employees in the U.S. and Canada to return to their offices in a “phased approach, based on many factors,” said spokesperson Glenn Greenberg.

But even after the company begins its reopening strategy after June 1, “voluntary work from home will remain an option for those who choose it,” he said.

When staff begins to physically return to the workplace, Greenberg expects the experience to look much different from what it was pre-COVID. “We will be more flexible to accommodate employees with personal circumstances that may have been impacted by the pandemic,” he said. “Now on a much larger scale, this experience has affirmed our ability to successfully operate virtually as a global company.”