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Redefining diversity for growth and resilience in insurance

diversity

To survive and thrive in uncertainty, to shore up organisational resilience and remain innovative, insurance firms must embrace diversity and meaningfully embed it in their culture and operating model. However, according to EXL experts – Raghav Jaggi, global insurance F&A leader and co-head property and casualty insurance, Mohit Manchanda, head of insurance, UK & Europe, and Prakhar Agrawal practice director, risk and compliance, UK & Europe – to reap the true benefits, they must first redefine diversity.

Now, more than ever, diversity is a recurring theme in our conversations with insurance leaders, some of whom have agreed to share their reflections here. They too agree that, while social diversity—the lens through which diversity is often viewed—continues to be extremely vital to business, today’s dynamic business landscape demands more: diversity of talent and ideas, supply chain, geography and operations, and digital fluency.

“Insurance companies have always thought about diversifying their portfolios as part of prudent risk management. However, today, companies need to broaden the definition of diversity – by being open to all people and possibilities, inviting different perspectives, and challenging the status quo. Embracing the five vectors of diversity is a must in today’s rapidly changing environment,” says Julie Haase, SVP and CFO, global retail markets, Liberty Mutual Insurance. 

Forward-thinking firms are committing to a broader definition of diversity across five vectors as an internal strategy for improving profitability and competitive performance, for moving the mindset from risk to resilience. So, what does this mean for insurers?

Social diversity

Diversity across gender, race, ethnicity, age and sexual orientation enables insurers to better attract and retain talent, enhance employee satisfaction, meet customer needs and improve decision making. A socially diverse workforce combined with the right corporate culture ensures better societal representation, greater adaptability, higher productivity and innovation and better alignment to a diverse customer base.

Additionally, diversity at board level is simply good for business. McKinsey reports that ethnically diverse firms are 35% more likely to outperform competitors, while the International Monetary Fund suggests a positive association between gender diversity in senior positions and corporate financial performance. Gender diversity is also credited with improving decision making, strategy and crisis communication. Lloyd’s of London’s CEO John Neal recently warned of a looming talent shortage in the insurance industry, highlighting the importance of age and experience diversity. 

The remote working norm spurred by Covid-19 can boost firms’ social diversity and inclusion by offering access to a wider talent pool, such as those with physical disabilities or caregiving responsibilities.

Cognitive diversity

Uniform ways of thinking result in echo chambers and limit both progress and potential; cognitive diversity, on the other hand, throws the doors to innovation wide open and presents endless opportunities to think and act differently, embrace wide-ranging viewpoints and challenge the status quo.

“Throughout my career, I’ve learned that the best ideas, solutions and customer understanding is achieved through the diversity of thought. It is critical to have a diverse team in order to achieve diverse perspectives. Diversity can come from so many different areas and through different experiences. For example, I had the opportunity to live and work in China for 18 months. Being immersed in a different culture made me realize that we bring so many unique perspectives to the table that benefits the work that we do. However, it is important to keep in mind that under it all, employees want to have meaningful work, to feel safe, to be able to provide for their families and to be heard and valued in the workplace,” says Laurie A. Ranegar, SVP operations, CNA.

Encouragingly, companies are starting to appreciate the value of cognitive diversity, for example, by dropping strict educational requirements from their hiring criteria to focus on the merits of real-life experiences. Psychometric assessments offer cognitive insights into applicants, while cross-breeding ideas and talent from other internal teams and departments can prove valuable. To truly benefit from cognitive diversity, though, insurance firms must build a culture that encourages non-conformant thinking and learning through mistakes.

Digital diversity

True digital diversity is achieved by building a digital workforce – a diverse suite of digital solutions – and blending it with a highly skilled, digitally intelligent human workforce. The result is a powerful hybrid team, the winning formula for resilience and adaptability in today’s uncertain world.

Yet fewer than 30% of insurers report achieving breakthrough outcomes from their digital initiatives. What’s more, the potential of artificial intelligence and cognitive abilities remains largely untapped. For insurers, the call is loud and clear: act fast to build a digitally diverse workforce. This may mean revising roles to align and accommodate new digital processes and re-skilling and redeploying employees, while reinvigorating digital initiatives.

Geographic diversity

Geographic diversity of workforce and operations plus the right infrastructure improves business operations while safeguarding against disruption. Location diversity is a major resilience driver in today’s disruption-prone business landscape. Covid-19 has forced businesses to rely on work-from-anywhere arrangements that now look set to become part of the long-term operating model.

Many insurance firms still have locally concentrated core operations, but geographical diversification will help spread loss exposures and align to macro and micro environment factors such as geopolitical risk, future pandemics and climate change. Global sourcing and rightshoring enables geographic diversity, enabling firms to leverage cost and language advantages and access cutting-edge innovation and talent.

Supplier diversity

The dynamic, interconnected insurance landscape is characterised by complex supply chains across continents. Disruption in any part of the intricate ecosystem can cause significant harm to the insurer and its customers. Equally, increasing reliance on a single outsourcing service provider can create a concentration risk. This has prompted many firms to move from a single-vendor to a dual-vendor strategy or even set up captives or joint ventures.

Supplier diversity opens up newer market segments, innovative products or services and better rates, while enhancing resilience. It is also at the forefront of the regulatory agenda – the Financial Conduct Authority, the Prudent Regulation Authority and the Bank of England recently emphasised the need for supplier diversity for insurance firms.

“Diversity and inclusion continues to become of paramount importance for all financial services organisation, in particular those with aspiration of creativity and innovation. Understanding and harvesting the full value of diversity will springboard firms to a more aligned strategy, higher quality workforce and a more collaborative culture. To consistently deliver the correct outcomes, needs a mix of insights, gathered from people with an individual outlook, upbringing and passion to succeed” says Harj Johal, director of customer operation & conduct, Direct Line Group.

Insurance firms are slowly but surely recognising the business benefits of diversity. Social diversity still needs attention as it continues to be the single most important factor for modern enterprises. Other four diversity vectors are also gaining prominence. A comprehensive understanding, appreciation and application of all five vectors of diversity will prove to be a hallmark of success. Those that embed diversity in their DNA will be better able to serve their customers, business partners and broader humanity, and navigate the challenges that future holds.

Contact us to know how we are helping insurance carriers and brokers on their transformation journeys, leveraging our deep domain expertise, advanced digital solutions, global delivery centers and approach for the future.

www.exlservice.com 

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