Insurers Face Mounting Diversity Practices Lawsuits

U.S. insurers are taking a closer look at the recruiting and succession practices of corporate customers, worried about mounting lawsuits over a lack of diversity among top executives and directors, industry sources said.

Insurers are meeting company officials to examine diversity practices before renewing or signing new so-called D&O policies to cover lawsuits against directors and officers, insurers and brokers said.

Before pricing coverage, insurers want details about top-level succession planning and how companies recruit, they said.

“This is an operational risk that’s not going to go away,” said Amber Finch, a lawyer who negotiates insurance coverage for companies.

A California law set to take effect on Jan. 1 compounds the risk, she said. It will require publicly traded companies headquartered there to name board members from underrepresented communities.