Culturally diverse boards of directors provide a significant, competitive advantage for insurance companies.
That’s the word from people in the know: three panelists, all of them board members at the multiline insurer Farmers Insurance Group, who presented on the closing day of the IICF Women in Insurance Global Conference. Held June 12-14 in New York City, the gathering assembled more than 400 women representing the world’s largest insurers, plus educational leaders and subject matter experts.
“Company with boards that mirror the diversity of their workforces and customers are the ones that will thrive in today’s global marketplace,” said Giselle Acevedo, who sits on the Fire Insurance Exchange board. “I can’t emphasize this enough.”
One reason, she noted, is that people of different ethnic backgrounds bring perspectives and life experiences to issues that might not otherwise be a priority of board discussions. Example: creating marketing campaigns or sales presentations so as to be sensitive to the customs or needs of particular communities.
“I’m a Latina and immigrant and so can speak to the views of people of color,” Acevedo said. “From a policy and shareholders perspective, I have to be able to raise these issues and do so independently.
“Also, policyholders want to know there are people on the board who look, act and think like them,” she added. “Diversity and good governance are interdependent and codependent.”
Culturally diverse boards have yielded significant returns on investment for companies across industries. Companies with three or more female board members outperform those with men only 60 percent on average, Acevedo noted.
The panelists cautioned, however, that companies can’t realize such gains by giving undue consideration to individuals’ backgrounds when endeavoring to diversify their boards.
When seeking candidates for board spots, competency comes first: the desired skills and professional experience are the prerequisites; the competency bar cannot be lowered to account for preferences as to candidates’ gender or ethnicity.
To be sure, few board recruits come to their positions with the depth of industry-specific expertise and knowledge of issues they will face in board discussions. So, freshmen board members should expect to spend quality time getting up to speed on the topics du jour, the panelists said.
“You have to have a foundational knowledge about the industry and the company to be effective,” said Dale Marlin, chair of the Fire Insurance Exchange and a Farmers Insurance Exchange board member. “To get educated on the issues, I read industry blogs and publications and consult with executives at Farmers Insurance. Don’t underestimate the time required to become conversant on the issues.”
To be effective, she added, new board members may also have to hone technical and analytical skills to properly interpret financial metrics. And they need to be well-versed in relational dynamics, an aspect of emotional intelligence needed to effectively navigate the give-and-take of board meeting debates. Marlin noted that women have an advantage over their male counterparts in this regard, in that they tend to be more inclusive and accommodating of other points of view in discussions.
Gail Jackson a board member of Fire Insurance Exchange, agreed.