Solving the insurance-industry pay gap
Is your insurance business compensating employees fairly? This author has ideas about how to measure that.
The insurance industry has a well-known pay gap that is worse than the national average and larger today than it was in 1951.
Fortunately, insurance companies are getting serious about pay equity based on gender and race — and for good reasons: One: it’s the law. Two: it’s good for business. Three: it’s the right thing to do.
The current dialogue around race disparity has raised the stakes, forcing brands to assess their role in ending systemic racism, including creating a more diverse and inclusive workforce.
However, whether you’re talking about race, gender, ethnicity, or other elements of diversity, inclusion initiatives won’t succeed without ensuring equal footing for all employees on the most fundamental element of the job: fair compensation. Pay disparities are both a symptom of and a contributor to inequality. That’s why the best leaders are tackling workplace bias by taking real action: finding and fixing pay equity issues.
Metrics for a fair workplace
The pay gap compares the average pay of all working men to all working women.
The pay gap tells us that women may not be hired into or promoted to higher-paying jobs at the same rate as men, which is reflected in representation in senior roles. According to Women in Insurance’s 2018 report, Leading to Action, women hold only 11% of named executive officer positions and 19% of board seats at insurance companies.
While a pay gap reveals an opportunity gap — the gap in the distribution in higher-level jobs — it doesn’t represent equal pay for equal work.
That’s where pay equity comes in.
Pay equity is the concept that individuals are paid equitably for performing substantially similar or comparable work. It is driven by legislation, including The Equal Pay Act of 1963 and states’ pay equity laws that have promulgated more recently. Put succinctly, pay differences are fine, so long as they are for a legitimate reason, and not because of gender, race, or ethnicity.
Five steps to analyze pay equity issues
1. Engage internal stakeholders.
Pay equity is a commitment — and potentially sensitive. In addition to executive buy-in, enlist support from key stakeholders in the business, such as legal, compensation, and diversity & inclusion (D&I) partners. This will help ensure execution on short-term and long-term goals.
2. Group employees doing substantially similar work.
Pay equity is about equal pay for equal (or comparable) work. Create groups of employees doing substantially similar work based on skill, effort, responsibility and working conditions. However, it is important to consider different options right from the start: There is almost always more than one possible grouping schema.
For example, some claim adjusters work from an office, while others need to assess claims in person and deal with fumes while roadside or out in hazardous conditions following a fire or hurricane. Are they substantially similar, or different enough to warrant a separate look? Both groups may have the same title and require comparable skill, effort, and responsibility, but their working conditions are different.
In contrast, actuaries’ and other analysts’ work requires processing data while working from a desk. In this case, it’s possible to group all of the actuaries and analysts together in one group. There are best practices for the insurance industry that are worth reviewing as far as grouping employees.
3. Control for job-related factors.
Once groupings are set, apply controls. These are neutral, objective, job-related factors that reflect a company’s compensation practices for setting and determining pay in each of those groups. Use “direct controls” — objective, non-biased policies that directly measure skill, effort, responsibility, or working conditions — such as hire date, location, educational attainment, years of relevant experience, etc. Avoid “indirect controls” — internally created systems that proxy skill, effort, responsibility, or working conditions. Common examples of indirect controls are performance ratings and job level/grade assignments.
4. Identify and review protected classes.
Pay equity laws at the federal and state levels vary in terms of which protected classes are covered. All pay equity laws cover gender, some cover race/ethnicity, and others cover other protected classes such as national origin or sexual orientation. Analyses can vary based on company locations and applicable state laws, as well as business goals.
Even if companies only plan to remediate pay based on gender, analyzing other categories offers a more complete picture. Many national or global employers have an interest in maintaining consistent standards across the organization, so it is often wise to default to including multiple protected categories in a pay equity review for reasons apart from minimal legal compliance.
5. Make final adjustments before allocating budget.
There are almost always non-economic adjustments needed, which are too often overlooked by employers. If employees are misclassified in a group or if pay practices aren’t fully captured with the initial controls, it is wise to update individuals or the structure of their work to reach a resolution without economic remediation.
Often this means cleaning up or correcting data by investigating outliers, moving individuals to a more appropriate group, and ignoring ‘unicorn roles,’ where a position does not have others performing substantially similar work. Iterating on these steps helps to ensure employee groups are reasonable and sorted with the right controls.
By following these steps, any company can create an accurate baseline for evaluating and ensuring ongoing pay equity. Using software to automate the process accelerates the analysis, enabling quick iteration and changes to sustain a company’s pay equity over the long-term. It also vastly improves efficiency in this process, enabling organizations to see critical information without having to wait for analysis to come back from a labor economist or statistician. Lastly, perhaps most importantly, be transparent by carefully and clearly communicating the results internally with leadership and employees, as well as externally.
Pay equity is an enduring movement that continues to gather strength and one to which we all can contribute.
Zev Eigen is the chief data scientist at and founder of Syndio, a workplace fairness analytics platform. The opinions expressed here are the author’s own.
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