Future of Insurance Work, Part 1: Let’s talk about race and ethnicity at the senior level
As we approach Spring and make our way out of the third national lockdown, we will all be sighing with relief that there is light at the end of the tunnel. However, there will be mixed feelings about what comes next. There is much talk about hybrid or blended working and with some trepidation, we will be thinking about dusting off those suits, being back in the office, and having face to face meetings, which in some cases will be a real treat.
What a difference a year makes, indeed! The future of insurance work is on our minds. In many ways, it feels as if a decade of changes have been made in 12 months, not least in terms of our ability to work from home due to the excellent timing of technology and part-digitalisation, but in terms of the softer revelations such as sweeping organisational and cultural changes like increased flexible working, the redefining of more caring and kinder workplaces, fairer and more inclusive workplaces, more flexible benefits for parents and carers, and a fresher outlook on the war for talent. We surprised ourselves and outperformed in many cases. And finally, we are able to talk about that awkward word, race. There, we said it, race. Perhaps if we say it three more times, the taboo will go away completely. Race, race, race.
2020 was a long-awaited awakening in many corporate circles that some things are no longer acceptable, and racial inequity, like gender and other inequities, should not be tolerated. This is a significant pivot that knocks squarely on the doors of recruitment and career development. It is now certain that inclusion and diversity is critical for our way of working in the future and it must be on all our agendas.
The penny has dropped and HR managers around the industry expect their recruitment firms and hiring managers to adopt a balanced pipeline. Our customers expect it. Our communities expect it. Our shareholders expect it. Our balance sheet feels competitively threatened if we don’t do it. Our regulators are demanding it to be prudent. Our C-Suite leaders realise that diversity is part of their own strategic risk management and that race fluency isn’t another language from Mars. Don’t learn it at your peril.
There is a flurry of activity in getting the recruitment pipeline to be representative of wider society, with a heavy focus on early careers, graduate intakes, apprenticeships, internship pledges, and even setting intake targets. It looks like the bottom part of Maslow’s triangle is going through a period of exuberance. This renaissance broadens rightly beyond race and ethnicity but also towards (dis)abilities, sexual orientation, religion, carers, the over 50’s, and returners. The industry should be proud and applauded for its collective efforts during the pandemic to get a better handle on these issues for improving the way we work and live.
Even amid progress, there is a key part missing. While there is a focus on the early careers, where is the pipeline of senior BME leaders, CEOs, and board members? Across the Atlantic, four Fortune 500 CEOs are Black – less than 1%. More than 10 years ago, there were seven. Closer to our shores, here in the UK, in early 2020, according to the Parker Review update report, compared to the FTSE 250, only 5% (80 out of 1,503) of directors who have disclosed their ethnicity as BME. At FTSE 250 companies, two thirds simply do not have any ethnic minority representation whatsoever on their boards; specifically, 69% (119 out of 173 companies) have no ethnic diversity on their boards at all.
With racial inequality firmly in the spotlight again this year, and the subsequent headwinds, now is a very good time to prioritise diversification at the senior management level.
Those who already have diversity fatigue should be forewarned as more pressure for change and equity is gathering pace. Recent events have shown that our past commitments need to be delivered upon, that senior leaders need to be at the driver’s wheel in driving real cultural change (not just HR and CSR), and that old rhetoric needs to be actioned. In the same turn, focussing acutely on ethnic diversity at senior levels and also on boards is equally essential. The talent pipeline for diverse ethnic minority talent is arguably improving at the junior and mid-levels in the larger insurance organisations – small green shoots growing at a slower pace. Meanwhile, the succession pipeline for senior and board membership seems to be lagging seriously behind. Change at the board level is not just slow but hard to observe with the naked eye. A single look on Google of any insurance board is telling. Where is the diversity?
“We don’t know where to find BAME senior board level talent!” This is an inexplicable common cry among senior leaders when serious effort has not been put in place to look in the right places. The Wells Fargo CEO, Charles Scharf, recently made this remarkable error of judgement when he publicly declared “there is a limited pool of black talent to recruit from”. This was followed by a grovelling apology to avoid a riot. Four years ago, in 2017, the Parker review committee was rightly commissioned by the UK government to consult on the ethnic diversity of UK boards, and to boldly set a target for all FTSE 100 boards to have at least one ethnic minority director by 2021, and by 2024 for FTSE 250 boards. For succinctness, as the summer of 2020 came and went, some 37% of the FTSE 100 boards remained all white and 59% of the FTSE 350 remained all white. The 2011 census showed that 14% of the population are BAME – 7.5% Asian, 3.3% Black, 2.2% mixed/multiple ethnic and 1% other ethnic. What will the latest 2021 census suggest? We should expect a significant uplift in these ethnic minority figures.
If we can acknowledge that an opportunity exists, and you authentically want to improve your board’s position, then here is your moment to accept and take ownership. Ethnically diverse leadership provides undeniable benefits. Sir John Parker, chairman of the Parker review committee, said: “Ethnic diversity needs to be given the same level of board room focus that finally led to increasing female representation on boards, which has seen real progress in recent years.”
So, where does this leave us?
Given our propensity for business cases, let’s first to talk numbers. A 2020 report by INvolve shows that the UK economy is losing £2.6bn due to discrimination against ethnic minorities. Barely 3% of the most powerful, prominent 1,000 people in Britain are from ethnic minorities and findings show that there is a £3.2bn pay gap for Black, Asian, and minority ethnic workers in the UK. A fascinating article in the October issue of The Actuary magazine suggests “firms in the top 25% for ethnic diversity are 33% more likely to make profits above the industry average, and those with ethnically diverse boards are 43% more likely”.
It’s more about a risk case than a business case for inclusion. In the cyclical world of insurance, we are focused on driving profitable growth, through better decision-making, innovation, and customer-centricity. Competitiveness is on our minds, with digital disruption and new entrants always on the near horizon; so, innovation is a must-have asset to remain competitive, to be attractive to customers and to stay relevant in the industry.
Having a diverse workforce will drive better decision-making and innovation and ultimately business value. Having a diverse workforce will ensure your company both reflects and meets the needs of their diverse customer and broker base. There is a war for talent that we are sleepwalking on as other industries fight to employ the best people with an increasingly self-conscious effort to hire diverse talent. Diverse companies can attract, develop, and retain a broader talent pool which allows them to serve niche markets with ultimately a better understanding of their customers.
The lack of representation beyond gender at senior levels is now inexcusable. Are you doing enough?
Maxine Goddard is an award-winning insurance leader responsible for directing and delivering strategic and operational change with an exceptional focus customer experience, business development, and innovation.
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