NYDFS regulator plans to engage more directly on diversity with insurers, banks

This story is part of a series on diversity in the U.S. insurance industry. Read more about race in the insurance industry and how regulators are approaching this topic. Read a Q&A with Progressive CEO Tricia Griffith here.

➤ New York’s top insurance regulator does not believe all the factors currently used in underwriting insurance policies are necessary.

➤ Insurance companies are responsible for ensuring that their products and practices are not having a disparate impact on minority communities, the regulator said.

➤ Diversity and inclusion are a “top priority” for the regulator, and the department plans to engage “much more directly” on the topic with companies, she said.

New York Department of Financial Services Superintendent Linda Lacewell is the leader of a department that has a long history of implementing progressive regulation for the financial industries under her purview.

S&P Global Market Intelligence sat down with Lacewell virtually to discuss how NYDFS is prioritizing diversity and inclusion in the industries it regulates, and how the insurance industry can ensure that its products and practices do not discriminate against communities of color. The following is an edited version of that conversation.

S&P Global Market Intelligence: Why do you feel it’s important to have greater representation of people of color and women in the insurance industry?

Linda Lacewell: Diversity for both race, ethnicity and gender is critically important in the financial services industry, and here’s why: It used to be people said you should be more inclusive with respect to underserved communities because it’s the right thing to do, and we’re all part of the same community, and that is true. But in recent years, there are all kinds of studies that have been developed that show that diversity for its own sake is important in decision-making.

To the extent that we as a regulator oversee the safety and soundness of financial institutions under our purview, it’s well within our prerogative to say — and we do — how are you doing on diversity? Because that makes you a stronger institution, and it’s of interest to us as we look at how you are dealing with all the evolving risks and challenges.

Over summer 2020 the National Association of Insurance Commissioners formed a Special Committee on Race and Insurance. What does the NAIC need to accomplish in order for its mission to be successful?

What the NAIC needs, at the end of the day, is action, and the NAIC has committed to action. Many of us have said to the NAIC, “Look, this can’t be a series of sessions with dialogue that result in either nothing, or something weak.” We’ve got to actually have a real impact, and that means initiatives to facilitate diversity within the industry, diversity within the NAIC, and [to understand] what the impacts of the insurance products and services are: Is there disparate impact on communities of color?

As you know, we’ve got three crises right now: The public health pandemic, the resulting economic crisis and loss of jobs, and the cry for racial justice across the country. These are all connected and related. They have to all be addressed. We’ve got to have the hard conversations, but we’ve got to take action, because otherwise, on this cry for racial justice, which includes people being treated equally with respect to opportunities including in insurance, we’ve got to make sure that people are not protesting in vain. We’ve got to use that energy and harness it.

Where is the insurance industry in terms of making sure its products and practices don’t discriminate against communities of color?

Even before the pandemic, we looked at the use of big data and artificial intelligence and said to insurers: If you’re going to look to big data, it’s your responsibility to make sure you’re…