Superintendent of Financial Services Linda A. Lacewell today announced new actions by the New York State Department of Financial Services (DFS) to promote diversity, equity and inclusion in the insurance industry.

“Countless studies have shown that companies with diverse leadership teams are more profitable, more innovative and better at managing risk,” said Superintendent Lacewell. “As the insurance industry grapples with the overlapping crises of the pandemic, economic uncertainty, racial unrest and climate change, strong boards and executive teams reflecting a diversity of skills, experiences and perspectives is even more critical to ensure that companies remain competitive in the face of evolving risks and opportunities.”

In a circular letter to all New York-regulated insurers, DFS outlined its expectation that insurers make the diversity of their boards and senior management a business priority and key element of their corporate governance, including by fostering a diverse pipeline of future leaders.

The circular letter is the culmination of extensive research and informal conversations with insurers, trade groups and diversity experts over the last year, and reflects the invaluable input of the committee of New York State’s Council on Women and Girls that was formed in 2019 to improve the representation of women, including women of color, in financial services.

Although diversity information for boards and management of U.S. insurers is limited, available statistics show that the representation of women and people of color in the insurance industry decreases dramatically as they climb the corporate ladder. While people of color made up approximately 24% of the industry’s entry-level workforce in 2017, only 8% made it to the C-suite. Similarly, women accounted for 57% of the entry-level workforce, but only 18% made it to the C-suite and only 1% of those C-suite executives were women of color.

Today’s action builds on DFS’s existing oversight of the corporate governance of New York-regulated insurers. Recognizing the ultimate role of insurance company boards and management in managing risks, the National Association of Insurance Commissioners adopted its Corporate Governance Annual Disclosure Model Act and Regulation in 2014. Both the Model Act and the corresponding New York regulation require insurers to disclose, among other things, whether they have a diversity policy and how it functions.

Diversity as a Strategic Priority

DFS advised insurance companies to treat diversity like other strategic priorities for their businesses, including communicating its importance to all stakeholders, explaining how it will be achieved, setting goals and measuring progress toward those goals. A company should strive to have a board and management team that benefit from the broadest diversity of skills, experiences and perspectives possible, including based on a person’s gender, race or ethnicity. Insurers should also focus on their pipeline of future diverse leaders, as well as the diversity of their insurance producers and third-party providers. DFS will begin including questions relating to an insurer’s diversity-related efforts in its examination process starting in 2022.

Collection of Diversity Data

Based on its research and outreach to insurance companies and trade groups, DFS has determined that the best way to support the industry’s diversity efforts is by collecting and publishing data relating to the diversity of corporate boards and management. Given the limited availability of insurance-specific diversity data, making that information public will allow companies to assess where they stand compared to their peers and raise the bar for the entire industry.

As a first step, DFS will collect data from New York domestic and foreign insurers with more than $100 million in annual New York premiums related to the gender, racial and ethnic composition of their boards and management as of December 31, 2019 and 2020, including information about board tenure and key board and senior management roles. The data will be collected in the summer of 2021 and published on an aggregate basis in the fall.

DFS strongly encourages companies to disclose publicly the diversity composition of their boards and management as part of their diversity commitment to their stakeholders.

DFS applauds the commitment of many insurance company CEOs and industry trade groups to increase the representation of people of color, women and other underrepresented groups on boards and management teams. However, recognizing that insurers are not all starting from the same place in terms of the diversity of their leadership and workforce, DFS advised insurers to assess where they stand, where they want to go and how they will get there, taking into consideration their size and other relevant factors, with a focus on improvement over time. DFS will organize a webinar focused on diversity, equity and inclusion best practices and addressing specific issues that companies have encountered in their diversity efforts.

Read a full copy of the circular letter on the DFS website.

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