Drive for Diversity

Companies big and small — in and outside the insurance industry — can reduce risk and increase profits by improving diversity. And improving diversity can help a company to avoid potential lawsuits and claims, said Terri Austin, chief diversity office for AIG, Corbette Doyle global chief diversity office for Aon, and Kathleen Marvel, chief diversity officer for Chubb, during their panel discussion titled, “Diversity and Risk: Beat the Odds with Multicultural Talent,” held at the Risk and Insurance Management Society Inc. annual conference in April 2008.

Most people have implicit bias, and therefore companies — and recently courts — are finding workplaces often have defacto discrimination, Doyle said. Thus, companies should make efforts to be inclusive and avoid racial, sex, retaliation, age and disability discrimination. Failing to do so could lead to U.S. Equal Employment Opportunity Commission employment claims and significant financial exposure, Austin said.

For instance, Austin noted a Michigan jury recently awarded $5.5 million to a former truck driver with epilepsy in an Americans with Disabilities Act case. State Farm settled a sex discrimination class action for $157 million. Coca-Cola Co. paid a $192.5 million settlement in a racial bias lawsuit in which African American employees said they were not getting equal rights as their Caucasian counterparts with regard to pay, promotions and evaluations, even though the company believed it was inclusive. In addition, the court noted an independent panel would oversee Coke’s employment practices, and the company would initiate a diversity program, which Austin said represents a significant intrusion in business operations.

To avoid such exposure, Austin advised companies create an environment of inclusiveness. When establishing diversity initiatives, if a company is not inclusive, it could wind up with more exposure, she said. For example, a McDonald’s employee recently sued when she claimed she was not receiving the same resources in terms of mentorships and training as members of the company’s networking group.

In addition to being inclusive, Austin recommended companies create effective hiring and screening programs to avoid discrimination; implement and communicate corporate employment policies throughout the workplace; conduct diversity training and awareness at all levels of the organization; show employees what steps to take if they are the object of harassment or discrimination; and document performance and standardize appraisals.

“Diversity initiatives aren’t about affirmative action or quotas,” Doyle said. Instead, diversity in a workplace leads to diversity in thought, which leads to a better pool of ideas.

“Research shows that companies that are more diverse are more profitable,” she said, noting a Catalyst study that indicated Fortune 500 companies with more women in senior management were more profitable. “Diversity of thought leads to innovation. You only have to look at Enron to see what happens when you don’t have diversity,” she said.

Doyle indicated that diversity initiatives can help to avert talent shortages. “We [the insurance industry] are going to soon face huge shortages due to retirements, there aren’t enough people to fill the gaps, and risk and insurance has an ‘image’ problem,” she said. She noted the Chartered Property Casualty Underwriting Society reported 53 percent of its members are over age 50; another 37 percent are between ages 40 and 50; and 10 percent are under age 40. Two percent of CPCUs are of color.

By expanding hiring efforts, companies increase their roster of potential employees to fill the gap. She suggested companies recruit more diverse workforces by working with youth-oriented organizations such as Junior Achievement, inviting inner city school students for an “insurance day” at the office and recruiting at college campuses.

To improve industry diversity, she suggested companies support minority-owned brokerage firms, and demand a diverse client service team from brokers and underwriters.

Marvel agreed, adding that it is important for companies to manage existing talent and evaluate the impact of diversity initiatives once they are implemented. Chubb conducts periodic engagement surveys of its staff. The survey includes questions to gauge whether any groups are feeling disengaged, she explained. If the company identifies any trends, it is compelled to improve on practices.

To encourage diversity at the mid-career level, Marvel said Chubb asks employees for referrals through alumni and professional organizations. The company also makes sure when a position becomes available, the slate of potential applicants is diverse.

Even when companies implement all those initiatives correctly, the speakers still advised agents and brokers encourage clients to purchase employment practices liability insurance.

“You want to avoid discrimination at all costs, but you also need EPLI coverage as a backstop,” Austin explained. EPLI is valuable in protecting companies from employment-related claims by employees, reimbursing against judgments, settlements and defense costs, she said.

“[The diversity initiative] practices aren’t a guarantee that a company won’t face a lawsuit,” Marvel added. Thus, companies still need EPLI coverage so they have protection and resources to respond to a potential lawsuit.

Yet Austin said a study by the Society of Human Resource Management indicated only 22 percent of survey respondents reported having EPLI coverage. “If all goes wrong EPLI should be in place to cover all types of discrimination claims,” she said.