British insurers should widen the range of people that sit on their boards in order to avoid the symptoms of ‘groupthink’, the Bank of England has warned.
The Bank takes the role of supervising insurers and wants to change the rules so that senior managers at insurance firms are more accountable for the decisions that they make.
The problem of a lack of diversity in the boardroom is an issue that can be found across many sectors of British business.
For example, just last month, the shareholder advisory group PIRC, criticised Britain’s largest insurance provider, Prudential, for omitting to have a target to increase the number of women on its board.
The Bank of England intends to make it so that insurers have to have a policy of considering a ‘broad set of qualities and competencies’ when recruiting board members.
Diverse boards, the Bank believes, will provide a more effective challenge to management, who could well fall into the groove of making similar decisions and fail to adapt to changing circumstances.
These actions will, the Bank hopes, provide a greater amount of protection for policy holders in the long run.
The Bank also intends to enforce quotas in order to make insurance boards more diverse, although added that companies were best placed to determine themselves the exact details of their diversity policy.