Your commercial clients could be leaving a huge risk exposed if they don’t reckon with diversity, equity and inclusion (DE&I).
Diversity, equity and inclusion (DE&I) is essential for agencies looking to serve clients and remain relevant in a changing world. It's also a risk factor that agencies should help their commercial clients mitigate, says James Felton Keith, CEO of InclusionScore.
“Not training at least someone on your staff, or even outsourcing to a subject matter expert firm, to bring DE&I into your clients' portfolio of services is missing a revenue opportunity," Keith says.
Directors & officers, employment practices liability insurance and errors & omissions clients are leaving a huge risk exposed if they don't reckon with DE&I. “In the U.S. alone, for the past 70 years since the Civil Rights Act, DE&I has really been a reaction to a crisis of some sort in corporate America," he explains.
“There are 5.2 million companies in this country that pay taxes," Keith continues. “They spend about $8 billion a year on DE&I projects, which is either training people, doing data extraction or analysis, building internal infrastructure, such as employee resource groups, or building external structure, such as joining the Latino Chamber of Commerce."
That $8 billion spent by corporate America each year on DE&I is “in reaction to $5 billion in litigation or non-litigation monetary benefits—lawsuits and the threat of lawsuits—that trigger different types of insurance policies such as EPLI, D&O and E&O," Keith says. “That all falls back on the shoulders of our industry."
In 2020, the International Organization for Standardization (ISO) released its DE&I standards, providing “fundamental prerequisites for D&I, associated accountabilities and responsibilities, recommended actions, suggested measures and potential outcomes," according to ISO. Those standards can provide a concrete way for agencies to mitigate their clients' D&O, EPLI or E&O risk.
Keith recommends having at least one person at the agency who understands the ISO standards—and if possible, certifying at least one employee in it—and then offering that knowledge as a service. “Let clients know you have the ability to facilitate a rigorous and real assessment based on this global consensus," he said. “Also make it clear that, unless they truly have no intention of getting better, it'll help bring down their risk premiums."
Acknowledging DE&I as an emerging risk requires digging deeper into your clients and prospects. In its assessments, InclusionScore examines 27 types of diversity that appear in legal dockets and HR departments.
“If you are vetting a client for EPLI, I wouldn't just want to know how many employees they have and what their revenue is," Keith says. “I want to know what the makeup of the employee body is. We can run predictive analytics to show how risky a company is and when the inevitable event lawsuit is going to happen."
When it comes to training agency staff to provide DE&I services, “the first thing you do is recognize some of these 27 different diversity types, which exist everywhere," Keith says. “I know large Black-owned or Asian-owned companies with hundreds of thousands of employees who think they're good from a DE&I standpoint. But the reality is no, they're not."
“Start with the auditor assessment. And then when the data comes back highlighting any areas they're not well-versed in, offer them a gradual way to become more mature," he says. “The agent has this unique opportunity to say, 'This will help you better manage your risk, reduce your premiums and better show us that you can manage risk instead of needing to transfer risk.'"
At the end of the day, it's simply too expensive for agencies to miss the opportunity to help their clients mitigate DE&I risk. “There's a revenue stream in there for agents who own the relationship," Keith says. “Whether they're doing the work directly or bringing in a third party, they have an opportunity to get a piece of the pie at every step of the value chain."
AnneMarie McPherson Spears is IA news editor.