It is still rare to find ethnic minorities in top-level positions in the insurance industry. And although the situation has improved in the past few years, their numbers are still nowhere near “representative” in the industry as a whole.
Is this because they do not want to join the field or is it because it actively discriminates against them? Any discussion on racial matters within the industry tends to be taboo, with a distinct lack of public debate or research.
In the general insurance sector, more than 100,000 people are employed in insurance companies and some 60,000 in broking. Another 50,000 to 60,000 are employed by other agents and support services, making a total exceeding 200,000. Over 5% of the UK population comes from ethnic minority groups and therefore, to be totally representative, the industry should be employing 3,000 Afro-Caribbeans, 5,500 Asians and some 2,500 Chinese. At every insurance event, 5% of people should fall into these groups – which means at least 50 of each should be at the two major award ceremonies. Certainly, at the top level, ethnic minorities are unheard of, yet they abound in accountancy, the law, medicine and other professions.
In underwriting it is illegal to discriminate on racial grounds but a large number of statistically-driven risks are based on experience in particular postcodes. The higher the loss ratio, the higher the rate and this, in a number of cases, leads to declinature or red-lining. The statistics are analysed on a three-to five-year basis to avoid being impacted unduly by a one-year blip. Local knowledge is also used to identify reasons for changes in risk patterns.
Population shifts are easy to identify on a local basis and, while worsening loss ratios can often be attributed to the movement of ethnic minority groupings, other factors, such as high unemployment, local recession, business sector changes and social housing policy changes, are less easily detected and can be overlooked. This could mean that statistical evidence from ethnic minority-populated areas might pass unchallenged, while “white areas” are given the benefit of the doubt.
It is no coincidence that a large number of those areas which are higher-rated or in decline or refer status – other than because of subsidence and storm – have high ethnic populations. Of course crime could be higher but it would be interesting to correlate white and ethnic areas with the same statistical patterns to see if any bias is taking place.
Rating by postcode cannot be seen as discriminatory. Insurance rates over the last ten years, however, have had little to do with book rates. It has been the decade of the discretionary discount. Even rates for statistically-based premium business have been discounted to secure or retain good quality cases. Once again, this can be an area for more subtle discrimination.
Reductions are usually agreed by underwriters at local discretion and there is often little consistency in decisions which are influenced mainly by the best rate in the market. I suspect that for recognised “ethnic” risks, the discretion is exercised less readily, leading to higher discounts for “white” risks. A name alone in these circumstances can be an underwriting factor.
Of course, everyone in the industry has anecdotal stories of poor risks: wire flexes used instead of plugs, textile manufacturers with workers sleeping in the workplace, drug handling, arson and race wars. Where there is a colour difference in play, it is much easier to stereotype and this often leads to the view, for example, that all ethnic minority-controlled textile risks are to be avoided; labour and housekeeping are likely to be poor, etc. These may have been characteristics of some first-generation immigrant businesses but are certainly no longer pertinent. A large number of second-generation ethnic minorities run highly successful businesses, combining an ethic of hard work with flair and the “British business culture”. They are extremely successful and, certainly from the insurance viewpoint, can be among the best risks of their type.
Of course, it could be that the industry is simply not attractive to ethnic minority groups seeking employment and the “risks” could justify underwriting attitudes. However, the fact is that ethnic minorities are playing an increasingly important role in business and, as an industry, we need to look through unprejudiced eyes. The starting point is employment and a concerted effort should be made to encourage the young in the minorities to join our industry so that we may be truly representative.