Madam Chairwoman, Ranking Member, and Members of the subcommittee, thank you for the opportunity to testify before you today. My name is Baird Webel. I am a Specialist in Financial Economics at the Congressional Research Service (CRS) focusing on nonhealth insurance issues. CRS's role is to provide objective, nonpartisan research and analysis to Congress. CRS takes no position on the desirability of any specific policy or policy outcome. Any arguments presented in my written and oral testimony are for the purposes of informing Congress, not to advocate for a particular policy outcome.

My testimony today will begin with a brief introduction and overview of statistics on the diversity and inclusion in insurance employment and conclude with some observations on the legislation announced as a subject of today's hearing.

Employment Diversity in Insurance and Overall Labor Markets

The private sector employs roughly 125 million people, with the U.S. Bureau of Labor Statistics (BLS) collecting a wide variety of statistics about the labor market. According to BLS, approximately 2.8 million people were employed in the insurance industry in 2021.¹ Average annual insurance industry earnings are an estimated $76,840 compared to estimated average total private earnings of $55,397.² Sub-industries included in the BLS data include insurance carriers ($82,655) and insurance agencies, brokerages, and related services ($69,499).³

BLS statistics also include breakdowns by racial and ethnic groups as well as by gender.⁴ For 2021, those statistics for the insurance industry included 58.9% women, 77.9% White, 13.2% Black or African America, 6.4% Asian, and 11.8% Hispanic or Latino, as shown below in Figure 1. Figure 1 also portrays the same categories for the overall "financial activities" category⁵ (52.1% women, 78.4% White, 11.3% Black or African American, 7.5% Asian, and 12.6% Hispanic or Latino) and the total U.S. working population (47.0% women, 77.5% White, 12.3% Black or African American, 6.6% Asian, and 18.0% Hispanic or Latino). It should be noted that there is some overlap among racial and ethnic categories, so it would not be expected that they sum to 100%.

2021

Figure 1. Insurance Industry Gender, Race, and Ethnicity 2021

Source: BLS, https://www.bls.gov/cps/cpsaat18.htm. Notes: Exact BLS series are "Insurance and related activities," "Financial activities," and "Total, 16 years and over." Race and ethnic group categories do overlap and would not be expected to sum to 100%.

The financial activities category can be broken down further, including into banking and securities industries, which roughly parallel the committees' previous surveys of the largest banks and securities firms. Figure 2 portrays the comparison of these three industries, while Table 1 combines the data from Figure 1 and Figure 2 and adds additional financial services occupational categories.

Figure 2. Insurance, Banking, and Securities Gender, Race, and Ethnicity 2021

Source: BLS, https://www.bls.gov/cps/cpsaat18.htm. Notes: Exact BLS series are "Insurance and related activities," "Banking and related activities," and "Securities, commodities, funds, trusts, and other financial investments." Race and ethnic group categories do overlap and would not be expected to sum to 100%.

2011-2019

Similar data are available for approximately the last decade. For this time period, however, BLS did not break out the insurance industry as a separate category.⁶ In order to generate the following presentation of 2011-2019 data, CRS utilized individual occupation categories that are specific to insurance⁷ to generate the "Insurance" category data and the individual figures below compare this composite category to the BLS-created "Business and Financial Operations Occupations" category for gender, race and ethnicity.

Figure 3. Insurance Occupations Diversity over Time: Hispanic or Latino 2011-2019

Source: CRS using data from BLS. Notes: The "Insurance" figure is a composite of the BLS occupation categories of Claims Adjusters, Appraisers, Examiners, and Investigators; Actuaries; Insurance Sales Agents; and Insurance Claims and Policy Processing Clerks. "Business/Finance" is the BLS category Business and Financial Operations Occupations. "Total" is the BLS category "Total, 16 years and over."

Figure 4. Insurance Occupations Diversity over Time: Asian 2011-2019

Source: CRS using data from BLS. Notes: The "Insurance" figure is a composite of the BLS occupation categories of Claims Adjusters, Appraisers, Examiners, and Investigators; Actuaries; Insurance Sales Agents; and Insurance Claims and Policy Processing Clerks. "Business/Finance" is the BLS category Business and Financial Operations Occupations. "Total" is the BLS category "Total, 16 years and over."

Figure 5. Insurance Occupations Diversity over Time: Black or African American 2011-2019

Source: CRS using data from BLS. Notes: The "Insurance" figure is a composite of the BLS occupation categories of Claims Adjusters, Appraisers, Examiners, and Investigators; Actuaries; Insurance Sales Agents; and Insurance Claims and Policy Processing Clerks. "Business/Finance" is the BLS category Business and Financial Operations Occupations. "Total" is the BLS category "Total, 16 years and over."

Figure 6. Insurance Occupations Diversity over Time: Women 2011-2019

Source: CRS using data from BLS. Notes: The "Insurance" figure is a composite of the BLS occupation categories of Claims Adjusters, Appraisers, Examiners, and Investigators; Actuaries; Insurance Sales Agents; and Insurance Claims and Policy Processing Clerks. "Business/Finance" is the BLS category Business and Financial Operations Occupations. "Total" is the BLS category "Total, 16 years and over."

Observations

On average, the BLS data show that the insurance industry pays a higher wage than overall economy-wide average in the country. Its workforce has a higher percentage of women and Blacks and African Americans than the general working population, but a lower percentage of Asian Americans and Hispanics or Latinos. Compared to the banking and securities industries, the comparison is similarly mixed. It appears that the diversity in the insurance industry has been increasing over time, which is consistent with anecdotal evidence that the industry is putting particular focus on hiring and employment of a more diverse workforce.⁸ These overall data, however, lack detail to make more specific conclusions. In comparison with the committee's survey and report,⁹ particularly lacking are more granular detail as to the gender, racial and ethnic diversity within the hierarchy of the companies. This does not enable an analysis of the diversity in leadership or executive positions. Further, the data do not break out data large insurance companies relative to smaller companies.

Insurance Regulation and Proposed Legislation

Congress endorsed the state-based insurance system in the 1945 McCarran-Ferguson Act.¹⁰ Although later acts, such as the 2002 Terrorism Risk Insurance Act P.L. 111-203 P.L. 111-203P.L. 106-102¹¹ and 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act¹² (Dodd-Frank) increased the federal presence, insurance regulation remains primarily the purview of the states, particularly in nonhealth insurance. This relative lack of a federal regulatory apparatus can pose some complications when Congress seeks to exercise authority over the insurance industry. For example, Dodd-Frank specifically created an Office of Minority and Women Inclusion (OMWI) within a variety of federal entities overseeing the financial services industry.¹³ The directors of these offices are charged with, among other tasks, "assessing the diversity policies and practices of entities regulated by the agency"¹⁴ Among the enumerated federal agencies, however, none of them would be considered to generally regulate insurers. The only current federal oversight of insurers is of holding companies with insurance operations which fall under the Federal Reserve¹⁵ and this is a relatively small number of companies.¹⁶

The draft Minority and Women Inclusion in Insurance Act¹⁷ would require the Department of the Treasury's Federal Insurance Office (FIO) to survey insurers and report to Congress on diversity in the insurance industry. The state insurance regulators are to be consulted in this study. Somewhat similarly, the draft Diversify Insurers' Workforce Study Act¹⁸ would direct FIO to study and report to Congress on recruitment, retention and attrition in the insurance industry and best practices in this area.

Another bill addressed in this hearing, H.R. 2123, the Diversity and Inclusion Data Accountability and Transparency Act, would add another mandate to the various OMWIs. Specifically, the bill directs that each OMWI director "shall require entities with 100 employees or greater regulated by the applicable agency" to provide information required to carry out the director's duties. As mentioned above, the relatively few insurers who fall under federal oversight are overseen by the Federal Reserve. The Federal Reserve OMWI has indicated that it has sent requests to as many as 1,475 institutions in a given year requesting self-assessments on diversity and inclusion. These surveys have been conducted since 2017 and the highest response rate to date has been under 13%.¹⁹ In 2021, 136 out of 1,178 institutions responded. The Federal Reserve OMWI identifies responding institutions by charter type (e.g., bank holding company or savings and loan holding company) at the holding company level, but not by business type at the subsidiary level. Thus, one cannot identify to what degree the insurers overseen by the Federal Reserve are, or are not, responding to the Federal Reserve OMWI's requests.

The other two bills addressed in the hearing, H.R. 1277, the Improving Corporate Governance Through Diversity Act of 2021, and the draft Diverse Investment Advisers Act both would approach diversity in insurers not through the insurance regulatory system, but through federal securities laws.²⁰ Federal securities laws affect far more insurers than direct federal regulation, so this approach arguably would have a greater impact on the insurance industry. Many insurers, however, are set up as mutual insurers and do not issue public stock, thus reducing to some degree the impact of federal securities laws. Even mutual insurers, however, may issue public debt securities and be impacted through these approaches.