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Recruiting a diverse workforce is not just a concern for human resource professionals, risk managers should promote diversity within their organizations to reduce liability exposures, a panel of experts said.
Risk managers can also use their influence with brokers and insurers to promote diversity within the insurance industry, they said.
Employers with diverse workforces are less likely to be hit with discrimination and shareholder lawsuits and they are in a better position to defend against such suits, said Machua Millett, Bostson-based chief innovation officer, FINPRO U.S. at Marsh LLC.
“For employment practices liability, diversity is a risk management technique,” he said Friday during a panel discussion at the Business Insurance Diversity and Inclusion Institute leadership conference in Chicago.
Firms, such as many in the private equity space, that have few minority employees and even fewer in leadership positions, are in a weak position to defend against bias suits, Mr. Millett said.
“From a risk management perspective, it’s incredibly important to have a diverse workforce and diverse leadership because hopefully the kind of behavior that ends up being a problem won’t happen in the first place. We are really good at shaming each other and sometimes positive shaming for certain behavior is a good thing,” he said.
The risk of third-party employment practices suits – which stem from employees harassing third parties, such as customers or vendors – and professional liability exposures – when a company is accused of having a pattern of discriminating in the services it provides – can also be reduced through diversity, Mr. Millett said.
“That’s much less likely to happen if you have smart, diverse people thinking about the risk that you are taking on,” he said.
Directors and officers liability exposures are also increased when companies lack diversity, Mr. Millett said.
For example, some firms that pay large severance payments to senior executives accused of sexual harassment, rather than simply firing the executives, can be accused of “corporate waste” and boards of directors can be accused of mismanagement if they fail to appropriately oversee diversity within their organizations, he said.
“For all of these (risks), diversity is both a risk management technique to achieve fewer of these cases and it can also be used as a practical defense for these kinds of claims,” Mr. Millett said.
Risk managers also help increase diversity and inclusion in the insurance sector by insisting that the brokers and underwriters on their accounts have diverse teams, said Elle Michell, founder and CEO of Intelligent Intentions LLC, a consulting firm in Greenville, South Carolina, and a former risk manager.
Risk managers “are able to hold our partners accountable in how they show up on our account and how they resource our account so we can have diversity at the table,” she said.
Risk managers should push their business partners to include diverse teams on their accounts, agreed Victoria Nolan, risk and benefits manager at Clean Water Services in Hillsboro, Oregon.
“Have them show you. Don’t just put it on the (request of proposal) but actually demonstrate it,” she said.
And risk managers, who often are required to work with different departments within their organizations, can help other employees involved in contracts and purchasing to reach out and find diverse talent, Ms. Nolan said.
Greater diversity within the insurance distribution system can be encouraged by insurers, said Jerald Tillman, owner of JL Tillman Insurance Agency in Dayton, Ohio, and founder of the National African American Insurance Association.
For example, insurers could institute a policy where they commit to doing a certain percentage of business with minority agencies, or larger brokers or agents could partner with minority firms, he said.
Attracting and retaining diverse talent in the insurance field continues to be a challenge, but Marsh LLC realized that one possible solution lies within the company.