On 22 November 2022, the FCA published a speech by Sheldon Mills, Executive Director, Consumers and Competition, FCA, delivered at the Association of British Insurers (ABI) Diversity, Equity and Inclusion (D&I) conference.
In his speech, Mr Mills addressed the following:
- Why diversity and inclusion matters: The FCA is committed to taking action on D&I because progress on making financial services, including the insurance industry, representative of the country and communities it serves remains at best uneven, and at worst, stagnant. In 2021 the ABI’s Talent and Diversity research found that only 24% of executives in the insurance industry were women, despite 55% of new joiners being women. Similarly, only 2% of insurance executives were minority ethnic, despite 10% of new industry joiners being minority ethnic. While indicators such as these have shown incremental progress they remain below what the public might expect.
- The FCA’s regulatory focus: Achieving a more diverse and inclusive financial services industry is an important part of the environmental, social and governance (ESG) priority the FCA has set out in its Business Plan for 2022 to 2025. There is growing evidence that a diversity of perspectives and thought, when part of an inclusive culture, results in better judgements and decision making. The FCA’s recent Financial Lives Survey data, covering the first half of this year, shows that, compared with the rest of the UK population, disabled adults are twice as likely, and black individuals are almost twice as likely, to have said that they find keeping up with their domestic bills and credit commitments to be a heavy burden. In that context, firms have a strong awareness that the diverse needs of all their customers is vital. The FCA believes that internal diversity and inclusion are essential to firms achieving this.
- The potential of data: The FCA’s recent supervisory exercise and pilot data survey, focussing on data, D&I strategies and inclusive cultures, has evidenced that less than a fifth of large firms collect data on the socio-economic background of their staff. The City of London’s Socio-economic Diversity Taskforce has stressed the importance of this data, henceforth, firms should consider how much more they can learn, and how much more progress they can make, if they broaden the data they collect.
- Driving action through D&I strategies: The FCA found that over 80% of the firms in their sample did have a D&I strategy in place. Whilst the FCA found that most strategies were focused on gender, with ethnicity a close second, the FCA’s strategies should have a sufficiently broad base to enable equity for all. Furthermore, the FCA found that most firms focus their strategies on senior-level representation. Whilst this is important, the data shows that diverse representation falls markedly between junior and middle-management levels. Firms can only benefit if they take a similarly holistic view of diverse talent development and succession planning.
- The importance of inclusivity: The FCA believes that the benefits of diversity can only be realised within a healthy firm culture that actively promotes inclusivity. The FCA has found that, within firms, in terms of actions, inclusion is not systematically approached alongside diversity. The FCA does not expect firms to develop this overnight, but, if firms want to make progress, they should consider what practical steps they can take to address the fundamental aspects of inclusivity, such as the welcoming of different perspectives.