Insurer Practices/Profits

A House Committee Examined Diversity and Inclusion at America’s Largest Insurers. The Results Were Not Pretty.

Over the past few years America’s largest insurance companies have stressed their commitment to racial justice, diversity, and inclusion. The industry has over $5.8 trillion in assets and often makes long-term investments in important sectors of the economy.

However, numerous consumer advocates have pointed out that insurance has a long history of unfair discrimination, bias, and racist practices that result in unrepresentative workforces and injustices in the marketplace.

On Tuesday, September 20th, the House Subcommittee on Diversity and Inclusion held a hearing examining diversity and inclusion at the biggest insurers across the nation. They requested data from insurance companies that received direct premiums of $7 billion or more to report and comment on their practices and policies.

The results were not pretty. Despite a flurry of statements and pledges, from 2017 to 2021 there was little change in racial, ethnic, or gender representation among insurance company employees. In 2021, the largest insurers had a lower percentage of employees of color (30.5%) compared to banks or the biggest investment firms. People of color were underrepresented in executive level positions, making up only 16.2% of those positions. Women were underrepresented as well, making up only 33.5% of those positions. Both groups were underrepresented on insurance boards.

Actions speak louder than words; despite insurers proclaiming their commitment to diversity and inclusion, the Committee found that the average budget insurers allocated to these subjects was $5.3 million, or 0.24% of their average total budget. That means that out of every $100 in an insurance company’s budget, the company is spending 24 cents on promoting inclusion and recruiting diverse candidates.

Members of Congress were not impressed. Chairwoman Joyce Beatty (OH) called the report’s findings “disappointing” and told the witnesses “none of you are doing well enough.” When an Allstate representative attempted to spin these facts and claimed that the situation wasn’t too bad, Beatty sharply pointed out that 24 of 27 insurance CEOs were white men. Rep. Maxine Waters (CA) lectured the insurers that “your response is not very good. You have to do better. All the insurance companies have to do better.” Finally, Rep. Chuy Garcia (IL) called out the insurers for their abysmal record on Latino employees—Latinos make up 8.8% of the insurance workforce and only 3.1% of insurance leaders.

While strong on the problems that insurers have with internal diversity and inclusion, the House subcommittee did not specifically focus on the deep-seated inequities in the insurance marketplace that punish tens of millions of consumers of color who are required to purchase insurance products by the government, lenders, and landlords. Whether through unfair pricing practices that use socioeconomic factors to jack up premiums or built-in biases that disproportionately flag policyholders in Black communities for fraud, insurance tends to cost more and provide less to people of color in America. The only member to mention this was Rep. Rashida Tlaib of Michigan, who gave a powerful speech about how the lack of diversity in insurance companies has harmed consumers. She listed a number of harmful nondriving factors—education level, occupation, credit score, gender, homeownership status, ZIP code/neighborhood—and asked rhetorically, “What do these have to do with being a safe driver?” The Allstate representative responded that she would connect Tlaib with people who could explain this.

The House hearing demonstrated how weak and dishonest insurers’ commitment to diversity and inclusion is. But the subcommittee could and should have gone further by looking more deeply at the way this interacts with the daily injustices consumers face in the market. In comments submitted for the record, Consumer Federation of America emphasized that

Congress must also investigate the inequities and discrimination that plague the insurance industry… we cannot wait and hope that examining diversity and inclusion will change the patterns and outcomes of decades of industry practices and biases. A hearing on diversity and inclusion at large insurance companies is not enough to address the inequities that are a chief target of this subcommittee. Therefore, we urge the subcommittee to follow this D&I hearing with a subsequent hearing on the biases, discrimination, and inequities faced by consumers.

For example, in March 2022 a whistleblower at State Farm, the nation’s largest insurer, told the New York Times that she was witness to discriminatory practices aimed at Black policyholders and claimants that resulted in disproportionately large numbers of claims denials and anti-fraud investigations for Black customers. The whistleblower alleges that the company’s practices were “simply a means of denying payment of millions of dollars to African Americans and other minority policyholders.” Yet the House committee did not discuss this allegation—and it should have.

When auto insurers use socioeconomic factors to underwrite and rate their prospective customers, these factors often serve as proxies for income and race. CFA and other consumer groups have conducted many studies over the years and found overwhelming evidence that these factors consistently lead to higher rates for safe drivers who are also disproportionately people of color and who have lower incomes.

The House hearing was a good beginning. But in order to uncover the true harm caused by the lack of diversity and inclusion in insurance and the high costs paid by consumers as a result, the subcommittee will need to probe deeper.