London’s importance in the 17th century as an insurance trade centre was introduced by the well-known story of Edward Lloyd’s coffee house. This location was popular among shipowners and marine brokers that needed to discuss or place maritime insurance. This is where the history of Lloyd’s and the London insurance market as we know it today began. “The boys” of the London market created a mechanism to transfer risks initially in shipping and expanded to numerous classes in the UK, America and beyond.
Access to this Market Place was a ‘privilege’ based on gender, social class and race; which captured the meaning of diversity back then. Surprising as it sounds, Liliana Archibald became the first female Lloyd’s broker in 1973, establishing a new era for the market and its first step towards diversity.
The London market has expanded establishing itself as a global insurance hub, concentrating specialism and capital to transfer complex risks. The ecosystem of the market altered and reasons for this shift are numerous.
Changes in the legislative environment and audits by the regulator and the EU established a more professional and regulated industry. Insurance companies reporting requirements expanded; there was now a need to justify decisions and hold sufficient capital reserves.
In the era of globalisation, businesses developed international influence and operating on a global scale, with the aid of advancements in technology and the availability of information, promoting migration, increased transparency and access to global events. The London insurance market welcomed global business and expanded worldwide adopting international ways of working.
Legislation was introduced and movements began, some of which are worth mentioning. The feminist movement in the 1960s established women into the workforce in great numbers. The Disability Discrimination, Equal Pay, Race Relations, Sex Discrimination Acts and Employment Equality Regulations came into force through time. These are key points in history where the UK started to promote diversity and inclusion.
The definition of diversity is changing. It does not lie only between gender, wealth and race anymore. Diversity means all the ways we are different, only some of which one is born into or with. Diversity is now the blend of diverse backgrounds, experiences, skills and perspectives.
Where are we now
London’s historic strengths have created a strong economy and ecosystem that companies could flourish. For example, the stable government, proven legal system, time zone and cultural diversity supported London to be established as a global business hub. To continue its legacy, the focus for the London insurance industry is to maintain its competitive advantage and increase its global share as one of the world’s fastest-growing insurance markets. However, based on the statistics presented in the London Matters 2017 report one of the issues raised is the lack of diversity in the insurance market, urging its prioritisation.
How far are we from establishing diversity in the London insurance market.
44% of the London market workforce are women, not far from equality. However, only 3% of Executive Directors are female in the London insurance market, which questions the equal opportunities that are given to both genders. It is an astonishing difference compared to the 21% of the FTSE 100 Executive Directors that are women, which is still not satisfying.
10% of the London market workforce are non-UK nationals, where 5% are non-EU, and 5% are EU citizens. It is a worrying statistic for a market that concentrates its efforts to maintain its global competitive advantage and attract foreign investment.
6% of London workforce have a Master or higher degree, 29% a Bachelor or equivalent and 65% below a bachelor or equivalent. 38% of the UK and 60% of inner London workforce have a degree, which might imply that the London insurance market is not one of the most attractive career paths after university.
Diversity is not just an unclear notion of fairness or equality. It is a business advantage to recruit the best talent and skills from a wider pool. This increases team strength, the power to innovate, broadens customer understanding and enhances the capacity to solve problems. Business value is created by the richness of ideas, backgrounds and perspectives. Companies that embrace diversity can gain market share and competitive advantages that in many cases be measured monetarily.
The London market faces similar challenges – and opportunities – too many other industries adapting their operations to the modern world. The insurance industry needs to get better at attracting the best talent to compete effectively in a global market. Diversity matters to the future of the insurance industry, to reduce risk, increase local knowledge, improve innovation and increase sales. Diversity can provide a deeper understanding of customers’ needs, which is vital for the industry since it is a relationship-based business where people buy from people. The competitive advantage of the London insurance market is threatened by turning a blind eye on diversity.
In the future
The solution is to understand what stands in the way of talented people progressing regardless of gender, background or sexuality while embracing change in the London insurance market.
The insurance industry should not be that you fall into it. The ecosystem of the London market is unique with varied and broad opportunities. The online presence of the market, formal and social events that aim to engage the younger generation are imperative for attracting new talent.
Companies in the insurance market should reconsider their hiring processes. The recruitment process should not be homogenous. Academic background and work experience do not necessarily need to be from the UK. Companies would need to cultivate their abilities to understand a wider spectrum of education systems and transferable skills.
Diversity is not evident and promoted in the insurance industry, thus cultivating a culture that fosters change is difficult. Obstacles on modernisation are faced by the industry and slow down to respond due to the reluctance to change. Failure of transformation programmes will be high if the market does not attract the right talent that is capable of bringing new skills and perspectives to form the future state of insurance.
As a whole, the industry should not point out the differences, rather embrace them. We hope “the boys” of the London market will become a historical term that we will be proud of their achievements and establishment of the London market, not a persisting tradition that we believe should be preserved.
Repeat after me – diversity matters!