ADVANCING SUSTAINABILITY & INCLUSIVITY
OPINION: DIVERSITY, EQUITY & INCLUSION
All inclusive
International supervisors are increasingly focusing on DEI in the insurance sector
Helen Rowell
DEI champion, International Association of Insurance Supervisors (IAIS)
Deputy chair, Australian Prudential Regulation Authority (APRA)
The International Association of Insurance Supervisors (IAIS) has recently published a stocktake report on the many activities underway that aim to promote positive diversity, equity and inclusion (DEI) practices in the insurance sector. The IAIS has committed to deepening and strengthening its DEI focus following the addition of DEI as a strategic theme of the IAIS’s work programme in late 2021. The IAIS has publicly recognised the centrality of DEI to the objectives of effective insurance supervision and a healthy and viable insurance sector.
So why is DEI so important? And how can insurance supervisors and the industry not only build on existing practices but gain momentum?
The importance of DEI for insurers
DEI is a critical component of a healthy organisational culture and sound business practices. When embedded, effective DEI can support a more resilient financial services sector by enhancing good governance and risk management and creating better outcomes for customers. DEI can also provide an insurer with strategic advantages. Insurers that are aided by diverse skill sets are better placed to find innovative solutions to existing and emerging challenges such as the accessibility and affordability of insurance products and services.
Advantages associated with strong DEI practices include:
“Insurers that are aided by diverse skill sets are better placed to find innovative solutions to challenges such as the accessibility and affordability of insurance products and services.”
The IAIS’s DEI stocktake report
In 2022, the IAIS’s focus was to examine, globally, the work by insurance supervisors, international organisations and insurance industry players to promote progress on DEI within the insurance industry. It found:
Whilst insurers are progressively implementing DEI initiatives, the stocktake report highlights that further work is needed to ensure effective monitoring and assessment mechanisms are in place to provide a feedback loop that encourages improvement and implementation of better practice.
Many supervisors report that their activities to promote DEI are at an early stage. The most common activities being taken, or planned for the near future, are shown in Figure 1.
The most frequently reported activity is advocating DEI through written and verbal communications. Second is asking insurers about DEI during supervisory examinations/interviews, for instance asking about:
Information collection and public disclosures are also amongst the more frequently reported actions. For those who reported these activities, many collect information on DEI and release aggregated statistics for industry benchmarking.
The stocktake also identified challenges for supervisors in progressing activities to promote DEI, as outlined in Figure 2, which provides a useful guide to areas for future IAIS focus.
* The potential for supervisors to be seen as hypocritical for focusing on DEI in the industry when their own practices are not as strong as they could be
Where to from here?
The IAIS stocktake report has deepened understanding of further IAIS work needed to support its members and support the promotion of DEI across the insurance sector. In 2023, the IAIS will focus on helping insurance supervisors further understand the benefits of DEI in the insurance industry, the connection between promoting DEI and their supervisory mandates, and the range of available supervisory practices to promote DEI.
One project will focus on the connection between DEI and an insurer’s governance, risk management and corporate culture, and the other on how DEI may encourage better customer outcomes, particularly for vulnerable or under-served customers. In addition, DEI will continue to be a strategic focus area for the IAIS, with interlinkage anticipated on a variety of other priority IAIS work, including on financial inclusion, fintech, climate risk and protection gaps.
Uplifting and embedding sound DEI practices will be a marathon, not a sprint. Through the sharing of experiences, ideas and better practices, the insurance sector is in an excellent position to take a leadership role in this area by demonstrating the importance of DEI for a positive financial services industry and enhanced consumer outcomes.
The Australian approach
The Australian approach
The Australian Prudential Regulation Authority (APRA) has an ongoing objective to uplift governance, culture, remuneration and accountability in the entities it regulates. Aligned to this, APRA also recognises the importance of strong DEI practices for a resilient financial system.
APRA has previously spoken about DEI in connection with the composition of boards and the importance of having a range of professional and demographic backgrounds to facilitate better decision-making and stronger risk management. This year, APRA will consider how it might strengthen DEI practices across its regulated industries as part of its review of its governance prudential requirements.