America’s biggest insurance companies are hiring more women and minority-owned asset management firms now than they did in 2017, even while diversity in their executive ranks has stalled, according to a report released today by the House Financial Services Committee.
The report documented that 44.4% of the 27 insurance companies that submitted data to the committee invest with women-owned asset management firms, up from 33.3% in 2017, while 55.6% invest with minority-owned asset management firms, up from 48.1% in 2017. The proportion of assets actually being managed by those women- and minority-owned firms, though, averaged about 2% and topped out at 8.3% for one insurer.
The data were requested on March 22, following parallel requests and subsequent reports on the banking and investing industries. The committee’s stated goal is to hold the nation’s largest financial companies accountable for workforce and supplier diversity, as previously reported by InvestmentNews.
Supplier diversity was a trailing consideration for insurance companies when most (91%) pledged to concentrate on diversity in the wake of the George Floyd murder in May 2020. Overwhelmingly, insurance companies led with promises to do better regarding diversity, but specifics were scant, with 16% committing to improve workforce diversity and only 0.04% committing to board and supplier diversity. An analysis by consulting firm Bain & Co. indicates that corporations face a complicated, long-term challenge to reach, onboard, retain and measure the effects of their intentions to spend more with diverse suppliers.
The committee report found that overall, insurance companies spend less than 10% of their total annual procurement budget with women and minority-owned firms: “The average amount of money spent with diverse suppliers at surveyed insurance companies was 2.7% with minority-owned suppliers, 2.4% with women-owned suppliers, and 1.2% with minority- and women-owned suppliers as a percent of overall procurement spend.” A quarter of the responding companies said that they had formal policies for investing with women- and minority-owned asset managers and with funds that have ESG disclosures.
All of the 10 insurers that reported the percentage of assets managed by women-owned companies said that they had less than 2% of their assets with those women-owned firms. Of the 12 insurers that released the percentage of assets managed by minority-owned companies, two — Prudential with 8.3% and Allstate with 5.2% — had more than 5% of their assets under management by minority-owned firms, with the remainder reporting less than 2%.
By way of contrast, the same committee’s report on the investment industry found that the country’s largest investment companies spent an average of 0.57% with women-owned asset management firms and 0.5% with minority-owned asset management firms. That report was released last December.
Gender diversity on insurers’ boards, with women at 28.5%, is in line with the 28% for investment firms and 30% for bank boards. With 22.3% of insurer board seats held by racial minorities, the industry leads the investment industry, at 17.5%, and banks, at 20%.
As in the prior reports on the investing and banking industries, the committee recommended legislation to heighten accountability and transparency from the industry and cited several legislative proposals, including a requirement that a minimum number of diverse asset managers be considered when insurers contracted with external managers.
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