It’s now well established that the more diverse teams are in terms of age, ethnicity, and gender, the more creative and productive they are likely to be. This matters at a time when insurance faces many challenges, not least the pandemic and the need to innovate. Yet research also points to a further aspect of diversity that can be hugely influential, not least when it comes to ethics.
Cognitive diversity is the inclusion in a team or firm, of people who have different ways of thinking, different viewpoints and different skill sets. Teams made up of people who think the same way have been found to struggle with new, uncertain and complex situations. Teams with members who have different perspectives and different styles of processing knowledge fare much better.
So where does cognitive diversity come from? These difference ways of thinking turn out to be established when we are young. They are independent of our education, our culture, and other social conditioning. And they’re less visible too. Someone from a different culture or a different generation gives no clue as to how they might process information, or engage with or respond to change (more here).
This then raises the obvious question of what a team or firm can do to encourage cognitive diversity. Three approaches can help with this.
Three Ways to Encourage Cognitive Diversity
Firstly, address something called functional bias. This is where the firm ends up with like-minded teams, because people tend to recruit ‘in their own image’ and because people tend to gravitate towards others who think and express themselves in a similar way. Disrupt these tendencies by making sure your recruitment processes look for difference and recruit for cognitive diversity. And when your team finds itself agreeing on how to tackle a large and complex challenge, find someone who disagrees and listen their input.
Secondly, look for the cognitive diversity that already exists within your firm. People like to fit in, so they become cautious about sticking their necks out. In behavioural ethics terms, this is referred to as conformity. You should be encouraging people to reveal and deploy their different ways of thinking. Leaders should be trained in how they can build their team’s sense of ‘psychological safety’.
And thirdly, monitor exit interviews and speaking up incidents, to tap into the behaviours and processes that are resisting cognitive diversity. Where people feel forced to take drastic steps, they signal cultural barriers to being listened to, to having their contribution recognised. A firm that learns from its mistakes is one less likely to repeat them.
Implications for Insurers
Cognitive diversity has significant implications for the ethical culture of insurance firms. It helps people to recognise and explore the ethical side of how a product has been designed, priced and distributed, and how claims under it are settled. It gives people confidence to challenge behaviours and decisions that expose your firm to reputational risk. It helps people to more confidently respond to new and complex ethical dilemmas.
So what about insurance in particular? I believe that some parts of the market display high levels of functional bias, or ‘group think’ as it is more commonly known. And I see some insurtech firms promote product ideas that are clever but questionable, because their team is so homogeneous in how they see and process things.
I wonder whether insufficient cognitive diversity could be behind a somewhat defensive mentality within the sector, making insurance people feel that they’re not understood or appreciated. From this, it’s a short step to seeing the public as ‘out to get them’, seeing regulators as too often questioning vital work. And from this comes a sense of ‘having to do whatever it takes’ to move the sector forward on certain initiatives. It’s a slippery slope.
A Personal Experience
Let’s end with a personal story. I underwent a long recruitment process in the mid 1990s to become head of insurance at Europe’s biggest fleet of vehicles. And I was appointed not just because I had the technical knowledge and skills, but also the confidence and diplomacy to challenge thinking about how things should be done, to ask awkward questions, to point out implications. This was needed because the fleet was about to have its core risk financing arrangements completely re-engineered, in order to deliver a step change in lease affordability.
At one stage, the senior vehicle manager and myself engaged in a series of long one-to-one arguments about certain aspects of that re-engineering. The board became worried that a falling out would endanger the project’s delivery, but when this was put to us, we were astonished. We both knew that we’d just been challenging each other’s thinking, and that this hammering out of ideas would establish the best way forward. So remember that cognitive diversity needs to be managed, for it can sometimes open up all sorts of ‘energetic’ discussions. Properly guided, it can delivery great results, as was the case with this project.
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