Insurance vs Investment Banking

Insurance Careers versus Investment Banking CareersInsurance is killer. Banking will kill you. Simples. Get into the right areas of insurance and you can have the cash without the 100-hour weeks. The insurance industry is the hidden gem of the finance industry and it’s shining bright. Think about a job where client entertainment is as much a part of the job as cutting dirty shapes in Excel. You’re out there, wheeling, dealing, building relationships, winning clients, smashing life.

It is true, insurance takes a special sort of person – you’ve got to be fun, switched on, and adaptable.  If you can go from nesting your 15th ‘if’ statement or ‘index-matching’ data tables to picking up the phone and 5-stepping an underwriter or a broker into accepting your deal, you’re probably going to make it in insurance.

Best stick to banking if you like being locked in a cage, having work offloaded onto your desk as your boss walks out of the door at 9pm.

“Yeah but I get dinner if I stay after 7pm, and a Mercedes will take me home after 9pm” (and that’s not a beautiful Spanish girl).

If you’re in banking and ever catch yourself defending your job with this line, it’s time to question what you’re doing.

So, what are the differences? Are there any? If you’re asking yourself why you would want to join insurance over banking, you’re asking yourself the wrong question. Ask yourself why you’d want to join banking over insurance.

As I see it, here are the differences…

Pay  – The glint in every banker’s eye: their reason and their goal.

Pay is a huge factor when considering a job and it is natural to be attracted to big bonuses. It’s true, you can be on a $100,000 salary in three years and your bonus can be up to 100%, but gone are the days of guaranteed bonuses – banks are systematically firing people the week before bonus pay day, so they are not eligible, or if you’re not in an area of expansion, you’ll be lucky if you get anything.

So let’s compare this to insurance. If you follow the right path and move into lucrative areas like reinsurance or specialist insurance, work hard and you can also be on $100,000, maybe not in 3 years, but certainly in 5. To prove this, one of my good friends is a claims adjuster and she was on $100,000 in 3 years, and that’s in claims. Bonuses in insurance aren’t small either; market underwriters and placing brokers can be on bonuses similar to banking.

What people do find difficult is the lack of transparency in the insurance pay structure. There is no norm in insurance, you will not be on x amount after 3 years or after you qualify, it is a meritocratic society where the best win and the others chug along.

Compare this to banking where you know that if you survive the ‘up or out’ policy, you’ll be on a $100,000+ salary as an associate. Insurance, unfortunately, does not have this transparency, however if you are talented and ambitious, you will move up the ladder quickly and the money will be there to greet you.

Hours – pulling all nighters isn’t just left for the weekend

This is why so many people either don’t go into banking in the first place, or drop out within the first two years. The hours in banking are savage! If you get out at 11 you’ll be happy that you got out ‘early’. Then there are the nights where you’ll be pushing through the foot traffic of people making their way to work as you’re going home for those 2 golden hours in the sack. It is true, if you can survive the years as an analyst, you’ll probably be ok and things do get better, but be prepared for long days and longer nights through your entire career.

The hours in insurance are not as brutal; when you join, 9 – 5 really does mean 9 – 5. As you get more senior these hours will ramp up though. When you start to make a name for yourself within the industry and develop your network, you will inevitably work harder than you did when you start, but you’ll still be out of the office at 8 and heading to your Soul Cycle class or to Le Pub.

Learning Curve – exponential or stepped changes?

The learning curve in banking is steep, so steep you’ll be slipping on your tears as you climb the gradient. Generally, this doesn’t level off and you’ll be always intellectually challenged (albeit through VBA wizardry). and for those who want constant pressure and challenge, banking is for you, but it’s sink or swim – for life.

Don’t be fooled, in insurance the learning curve is also very sharp and you have the battle against the unknown to conquer, as it will all be new to you. There are constant challenges in insurance and you’ll be challenged on a daily basis. Personal development opportunities will be there in abundance, yet the pressure won’t be as severe and you won’t have the worry of losing your job hanging over you every day.

Progression – where do you see yourself in 3 years? well actually, I’ll be here…
In banking, like accountancy and law, the promotion ladder is very clear cut. You start as an analyst and after three years you’ll become an associate. If you get through the next three years you’ll get to vice president and then move up to SVP. It all seems too easy; but if you aren’t in the top performers, you’ll be tossed to the ground with nothing but a Black & Red notepad covering your hiney. Well ok, it’s not that bad, your manager will just be given a script to read to you, before a lawyer walks in and reads you your rights. Then you get tossed out.

In insurance, the harder you work and the more talented you are, the faster you get promoted. It’s that easy. One of my friends won $1.2 million in new business for his company in 2011 – the senior underwriter badge came soon after. He’s 26.

The benefit of not being boxed in to set review dates can be great as you can progress faster, but it has its drawbacks and you’re left with a degree of uncertainty. If this doesn’t bother you, then not a problem.

Transferability – want to pack it all in and run away to Jamaica?

Within banking, you learn the vital finance skills needed to run a global business and will have an in depth understanding of business figures. This will put you head and shoulders above the competition if you are looking to move into another industry.

The insurance trade is very specialist and within it you develop a specific set of skills which suits the insurance industry. I have to say, this is a drawback. The deeper in you get, the harder it is to leave. But never fear, there are some great skills that you do learn in insurance that are incredibly transferable, like negotiation and influencing skills, business development and accountability. If you are looking to join another industry, going into risk management or consultancy, specialising in insurance would be a good gateway.

Stability – never been one to rock the boat?

Banking has always been very aggressive in their employment policies and for many roles it’s either up or out. Coupled with the fear that the bank may cut your division at any moment, you could end up looking for that hair loss treatment a bit sooner than expected.

The employment practices in insurance are not as cut throat and you will not have this constant uncertainty. You will have the job stability you need to concentrate on your development and getting things right. You can be successful without the constant fear of being culled.

Global Travel – see yourself as the next Gulliver? 

Are you looking for a globe trotting, modern age lifestyle, or are you thinking of moving to Seoul in pursuit of happiness? If you are and you’re in banking you’re probably going to have to think about a career change. Investment banking is transacted in the financial districts of the world and basically nowhere else.

With insurance you have more flexibility, but not much. Insurance, much like retail banking, is found everywhere, however if you’re in reinsurance or specialist insurance, there are only certain places you can work. The reinsurance centres of the world are London and Bermuda with pockets elsewhere, and specialist insurers tend to base themselves close to the  Lloyds of London market. However, insurers will have offices all over and they aren’t tied to the financial capitals like banks, so if you move up and across into something a little more mainstream, you can move out of the big cities and into a leafy suburb and still be on a healthy salary.

So there they are; the main reasons why you should be considering insurance before investment banking. In my experience, these are the main things people want to know about when starting a new career. Let me know if you want information on anything else, or leave a comment if you want to have your say.

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