With $310 billion in buying power, California’s insurance industry is the largest in the nation and the fourth largest in the world. In 2011, the State of California established the Insurance Diversity Initiative (IDI) focusing on the collection of diversity data amongst the state’s top insurance companies. From 2012 to 2016 alone, IDI insurers reported a 70 percent increase in spending with California diverse businesses.
With the success of the initiative, California Insurance Commissioner Dave Jones connected with four states (Oregon, Washington, New York, Minnesota) and the District of Columbia to expand the IDI nationally in 2016. This new program became known as the Multistate Insurance Diversity Survey (MIDS) Initiative.
The MIDS Initiative “was established to understand the state of supplier and governing board diversity among the nation’s now $1.84 trillion insurance industry. Through transparency, these efforts aim to encourage economic opportunities, board governance diversity, and increased procurement from the nation’s diverse suppliers.”
On Sept. 5, 2019, the state of California passed Senate Bill 534 (SB 534), reauthorizing the state to collect diversity data from California insurance companies. With the passing of SB 534, the Multistate Insurance Diversity Survey (MIDS) immediately took on a new form for insurance companies.
From MIDS to CAIDS
According to the California Department of Insurance, “as of 2020, the California Insurance Diversity Survey (CAIDS) is being administered by the California Department of insurance.” In addition, as of February 2020, “no other states will be involved in this survey administration.”
This is a major change. In prior years, MIDS required insurance companies with sales in five states (California, Oregon, Washington, New York, Minnesota) and the District of Columbia to report their diversity data. This is no longer the case. Starting in 2020, the new CAIDS survey only requires insurers with sales in California to submit a report.
Based on our research, CAIDS will focus exclusively on insurance organizations with operations in the state of California. The existing law will continue requiring admitted insurers “with premiums written equal to or in excess of $100,000,000 to provide information to the Insurance Commissioner on all of its community development investments and community development infrastructure investments in California.” In addition, according to SB 534, the upcoming questionnaire will request that:
- Insurers report to the commissioner on their minority, women, LGBT, veteran, and disabled veteran-owned business procurement efforts.
- Insurers report to the commissioner regarding the demographic makeup of the insurer’s governing board and the insurer’s goals regarding board diversity.
These are survey questions that were required in the past. Exact requirements for the above points are included in sections 927.2 and 927.3 of the bill.
One significant change in the survey is that insurers will only need to submit it biennially—during even-numbered years. The previous MIDS survey required annual submissions. Additionally, the new bill appears to make this a permanent requirement.
Another major reporting change is that insurers must provide information on suppliers that have a majority of their workforce in California, even if the supplier is not headquartered in the state.
In the past, insurers only had to report on suppliers that were headquartered in California. In our opinion, the latest change will be challenging to complete because tracking supplier workforce location is not information currently collected by most corporations. We believe that many insurers will not be able to report this information.
Due Dates and Penalties
The new CAIDS report will be due on July 1, 2020, with plans of the reported information to be released to the public by Nov. 1, 2020. Companies can request a 30-day extension if any issues arise with the due date. The Insurance Commission will analyze the submitted information and post its results by November.
Under the bill, a failure to report the information by the reporting deadline would subject the admitted insurer to civil penalties to be fixed and enforced by the commissioner. The current penalties include a fine of $5,000 or $10,000 if the act is deemed to be willful. If a company requests an extension and fails to submit the report, it is deemed willful non-compliance, and the fine for this will be $10,000.
How Can CVM, a supplier io Company, Help?
Whether you’re an insurance company or a supplier to the insurance industry, CAIDS affects you. Now is the time to bring your supplier diversity practices in alignment with CAIDS requirements. More than 70 percent of major insurance companies use supplier.io and CVM products for prime and Tier 2 reporting, which will make it much easier to complete the Insurance Supplier Diversity Survey successfully.