Filed Under:Agent Broker, Agency Management

4 diversity challenges stifling insurance innovation

Opinion

The history of the insurance industry has been one primarily defined by a de facto lack of diversity, though we are seeing that change over time. (Photo: iStock)
The history of the insurance industry has been one primarily defined by a de facto lack of diversity, though we are seeing that change over time. (Photo: iStock)

No one will be surprised to read the insurance industry has a significant diversity hurdle. Unlike several of its professional service industry peers, our industry is late to the idea that diversity, in all its forms, makes for good business.

However, the insurance industry faces historical diversity challenges that are stifling much needed innovation. Some of these challenges are systemic and will ease with time, while solutions to others require new thinking for an industry facing a host of hurdles as well as opportunities.

Here are four diversity challenges that are stifling insurance industry innovation:

No. 4: A history of homogeneity


The history of the insurance industry has been one primarily defined by a de facto lack of diversity, though we are seeing that change over time. Other professional service groups such as accounting firms, law firms and the financial sector, among others, long ago saw an organic shift in their campus recruitment talent pools which, by their nature, offer more diverse candidates. Conversely, the insurance industry has traditionally focused on recruitment of experience rather than of promise. What does that mean? By relying on network-based recruitment of those already working who offer some level of experience in the industry, the insurance industry has traditionally skipped the less-experienced but more diverse college student contingent.

Related: 11 ways to attract and keep young talent

In fact, rigorous campus-based recruitment has only been a reality for the insurance industry over the past five to 10 years. This puts insurance at a tremendous disadvantage in terms of diverse talent recruitment, and that reality is apparent when you look at the pipeline of middle to senior level management and executives across the industry.

Related: Diversity in insurance: beyond the quotas

The remedy for this challenge is time. While late to the concept of large-scale campus recruitment, the industry is making headway. A study from McLagan, an independent subsidiary of Aon Hewitt, released in February 2017 showed the executive leadership at public companies and mutual insurers continues to be dominated largely by Caucasian males. However, the study noted “rank and file” numbers at these organizations are considerably more diverse.

As younger, more diverse talent continues to join the ranks of the insurance industry, this issue will ease over time as diverse hiring practices serve as a long-term solution.

By relying on network-based recruitment of those already working who offer some level of experience in the industry, the insurance industry has traditionally skipped the less-experienced but more diverse college student contingent. (Photo: iStock)By relying on network-based recruitment of those already working who offer some level of experience in the industry, the insurance industry has traditionally skipped the less-experienced but more diverse college student contingent. (Photo: iStock)

No. 3: A hierarchical hegemony


Like other professional service industries, insurance has always been a hierarchy. Following the apprenticeship model, insurance professionals have been shaped to spend years honing their craft before ultimately moving into the leadership ranks as more experienced professionals leave the industry.

Related: 4 steps that foster a culture of innovation

An outcome of this hierarchical structure is unidirectional communication: information flows from the top down. Absent a two-way flow of ideas and information, innovation is stymied. For innovation to thrive in any organization, there needs to be transparency of thought, open lines of communication, the ability to challenge ideas safely, and minimal risk to one’s career for thinking outside of the box. Traditionally, this has not been a guiding principle of insurance. Younger professionals who find themselves working in these hierarchical environments are tacitly discouraged from questioning how things are done. As such, these professionals are unconsciously reluctant to challenge ideas and concepts for fear of placing their careers in peril.

However, as insurance adapts to modern talent management practices, organizations of all types are increasingly creating more open forum dialogues and crowd sourcing ideas. In addition to recruiting professionals offering diverse backgrounds, experiences and ideas, this crowd sourcing approach allows for development and improvement of best practices. This conditions management to ask for input and creates colleague networking groups to test innovative concepts.

Related: 7 ways for insurance agents to create a culture of success

As this hierarchical model gives way to flatter structures and more open management discussions, everyone in an organization will have a voice in how the business operates. We’ve already begun to see this solution manifest in the insurance technology sector, and we should expect this practice to continue to spread across the insurance sector, becoming an industry standard approach within the next few years.

Without an business culture that encourages a two-way flow of ideas and information, innovation is stymied.Without a business culture that encourages the two-way flow of ideas and information, innovation is stymied. (Photo: iStock)

No. 2: A reluctance for risk


Insurance is about mitigating risk, and as such, it either attracts those who are naturally risk-averse or conditions its professionals to become more mindful of risk over the course of their careers.

Innovation, however, is defined by experimentation. To nurture and produce real innovation, organizations must foster a culture of iterative exploration that has long been anathema to the risk-averse culture of insurance. The idea of breaking something in order to figure it out and make it better can be a challenging proposition for an industry where “breaking” something is seen as inherently bad. It’s also a concept not historically embraced by the baby boomer generation which, by and large, still holds the majority of leadership positions in insurance. That generation has a greater sense of permanence, and focuses on expert execution rather than experimentation.

With the incorporation of digital platforms to the insurance model and the retirement of 11,000 boomers per day from the global workforce, that sense of permanence is ebbing. As GenX and millennials assume a greater proportion of leadership roles in the insurance industry, we can expect more innovative corporate cultures that will drive the market, and subsequently remove another barrier to both diversity and innovation.

Related: Are these emerging risks on your radar?

No. 1: A culture of comfort


Where you find great diversity and inclusion, you also find a certain level of discomfort. This isn’t a bad thing. In fact, it’s discomfort that fosters the creative thinking and a free flow of ideas that leads to innovation.

Unfortunately, in the insurance industry, discomfort has long been something to avoid. In the broker sector of the market specifically, there is a high degree of cordiality, and a recurring theme in the insurance industry is how polite and superficially respectful everyone is to one another. However, by avoiding making people uncomfortable, we avoid disagreement and challenge. As a result, we fail to get the free flow of ideas that lead to innovation.

The solution here has nothing to do with time. Instead, our industry needs to get really intentional and explicit. However, fostering this intentional approach can itself be a challenge. The best way forward is to reach out with messaging that focuses on creating a dialogue and to specifically state our intention of “stirring the pot.”

At Marsh, we’ve used the mechanism of storytelling to shake up the status quo, and encourage more diverse thinking. Using this approach, organizations can illustrate practices and perspectives that challenge people’s concepts or pre-conceived notions of others. By illustrating approaches and behaviors that explicitly illustrate what we mean when we say things like “do the right thing,” we remove assumptions and present opportunities for diversity of thinking, challenging ideas and problem solving.

Training our talent pools in a way that encourages the challenging of assumptions — fostering those uncomfortable conversations — can lead to extraordinary innovation within the industry. It can also create a more confident, engaged and enthusiastic workforce. Challenging ideas while still maintaining a culture of respect are not mutually exclusive.

To nurture and produce real innovation, organizations must foster a culture of iterative exploration that has long been anathema to the risk-averse culture of insurance.To nurture and produce real innovation, organizations must foster a culture of iterative exploration that has long been anathema to the risk-averse culture of insurance. (Photo: iStock)

No single solution


History is not overcome in a single year or through a single initiative. Diversity alone is not the answer to insurance industry challenges. In fact, taking on a diversity initiative merely for the sake of diversity — absent the language, experience and training necessary to cultivate that diversity — can be both divisive and damaging, eliminating any chance for fostering an environment that encourages innovative thinking.

What other reasons do diversity programs fail? Frank Dobbin, a professor of sociology at Harvard University, co-wrote an article with Alexandra Kalev, an associate professor of sociology at Tel Aviv University, that was published in the July/August 2016 issue of Harvard Business Review on the subject. The authors’ examination of diversity programs across hundreds of entities revealed that merely working to eliminate bias in the workplace often fails.

The most effective diversity programs yield strong employee engagement, increased contact among different groups within organizations and a strong desire to succeed in the estimation of colleagues and leadership. In fact, the authors noted, “some of the most effective solutions aren’t even designed with diversity in mind.” By focusing on problem solving and creating iterative learning environments, organizations yield greater results and, sometimes as a byproduct, yield more diverse business cultures.

Thoughtful action required


In today’s business culture, everyone wants to be thought of as innovative. That term is used much more freely than in years past. However, true innovation requires a great deal of thoughtful effort, periodic setbacks and rethinking, and a determination to ensure all voices within an organization are heard.

The insurance industry has begun to recognize and address its need for greater innovation. More importantly, industry leaders are largely in agreement that the innovation needed within the insurance industry can only be brought about by incorporating the experience and thinking of a range of diverse perspectives. What we need is time to see it through and the intention to make the seemingly uncomfortable changes necessary to truly innovate our industry.

Bo Young Lee is the Global D&I Leader at Marsh LLC and Guy Carpenter. She can be reached at BoYoung.Lee@marsh.com.

In June, this author will speak on diversity issues at the Insurance Industry Charitable Foundation (IICF) Global Conference in New York City. Click here for more information about that event.

Opinions expressed here are the author's own.

See also:

In claims, all roads lead to innovation

Insurance 2017: Priorities for innovation, automation and transformation

5 mistakes agency start-ups make

2 more key strategies for growing your insurance agency

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