In June 2017, the Prudential Regulation Authority (PRA) consulted on proposals to require Solvency II insurers and large non-directive firms (NDFs) to have a diversity policy for their boards (CP8/17), and in February 2018 (policy statement PS1/18) it was confirmed that firms will need to have a board diversity policy in place by Monday 09 April 2018. The PRA is seeking to promote a diverse board composition, which in turn it hopes should improve the effectiveness of boards.
HM Treasury has recently announced that the extension of the Senior Managers & Certification Regime (SMCR) to insurers will come into effect on 10 December 2018, increasing individual accountability at all levels of firms. There is a fear that the increased scope for personal accountability will lead to a decrease in the number of people prepared to take on senior roles in the sector, which could have implications for diversity, and a tendency towards “groupthink”, as individuals seeking to use collective responsibility as a mechanism of individual protection.
A diverse workforce, not only in measurable factors such as gender, age, tenure and race but encompassing diversity of approach, skills and experience, is more important than ever to combat groupthink and ensure prudent and effective running of firms and the industry as a whole. The industry needs to reflect the diverse society it works within in order to function effectively; this should also enable firms to respond better to customers’ needs.
Our article (Optimisation of the SIMR: Combatting ‘groupthink’ in the insurance industry?) explores in more detail what this will all mean; in essence firms are going to have to ensure that diversity of skills, approach and experience are considered when recruiting new board members, and to have a policy to promote diversity among board members.
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