California Governor Gavin Newsom recently signed into law California SB 534, Insurance Reporting Update, a bill that will have a wide-reaching impact on supplier diversity and the growth of diverse-owned businesses.
What is it?
SB 534 reauthorizes California’s Insurer Supplier Diversity Survey, which expired in January 2019. This particular piece of legislation mandates increased transparency and opportunities for partnerships between the nation’s largest insurance market and diverse suppliers by requiring all insurance companies with written premiums of $100 million or more in California to report their procurement efforts with minority-, women-, LGBT- and veteran-owned businesses by July 1, 2020.
The insurance industry is a leader in supplier diversity nationwide. Along with automotive, pharma, and healthcare, insurance is using its position as a major economic player to push for widespread advancement in supplier diversity throughout the sprawling supply chain. SB 534 brings California back in compliance with the Multistate Insurance Diversity Survey (MIDS) Initiative, which was established by California’s Insurance Diversity Initiative. Through MIDS, California partners with Washington, DC, Minnesota, New York, Oregon, and Washington to track and analyze the state of supplier and governing board diversity within the nation's $1.84 trillion insurance industry.
According to the MIDS website, “Experience indicates that increasing procurement opportunities for diverse suppliers has helped insurers reduce costs by obtaining more competition for procurement opportunities. Research also shows that firms with greater governing board diversity perform better financially.”
When putting forth SB 534 to reauthorize the Insurance Supplier Diversity Survey, bill sponsor Senator Steven Bradford noted that in California, spend with diverse-owned businesses rose from $930 million in 2012 to $1.8 billion in 2017, a 93 percent increase over a five-year period.
It’s noteworthy that this update expands the reporting to include spend with LGBT- and veteran-owned businesses, further encouraging buyers within the industry to pursue partnerships with even more diverse firms.
The update also adds the Governing Board Diversity Survey to help improve diversity at the highest levels of governance and codifies the Insurance Diversity Task Force, which aims to help the department meet its overall goal of increasing supplier and governing board diversity within the industry. These two additions are important when it comes to moving the needle toward diversity and economic equality but are not our focus today.
How do I comply?
As stated above, all insurance companies with written premiums of $100 million or more in California are once more required to report their procurement efforts with minority-, women-, LGBT- and veteran-owned businesses biennially. The first reporting deadline is July 1, 2020.
Requirements for the renewed survey have not yet been released, but we don’t expect much variation from prior requirements. Based on previous MIDS reports, you will need to track spend with all diverse companies in the categories listed above at both the prime and Tier 2 levels. The survey also asks if you have a supplier diversity policy statement, if you have a supplier diversity program, and whether you set internal goals around supplier diversity.
(You can read the 2018 MIDS report here for reference.)
I don’t sell insurance. How does this affect my company?
With $310 billion in buying power, California’s insurance industry is the largest in the nation and the fourth largest in the world, so the significance of this legislation reaches beyond the state’s borders. If you count an insurance company as a custome, even if you don’t collect insurance premiums or offer any insurance services, you need to pay attention to what this bill requires. It affects any company doing business with an insurance provider that operates at above that $100 million threshold in California, whether or not the supplier is located in the same state.
As the July 1, 2020 reporting deadline approaches, expect requests for your diverse spend in the above categories for inclusion in Tier 2 reports. You may also see more insurance companies including contractual language requiring a supplier diversity policy to do business with them. If you’re not already tracking diverse spend and don’t have a supplier diversity policy, now is the time to put those pieces in place. And once you have implemented both, consider reaching out to clients in other industries and asking if they would also like you to report that information to them.
Whether you’re an insurance company or a supplier to the insurance industry, MIDS affects you. Now is the time to bring your supplier diversity practices in alignment with MIDS requirements. More than 70 percent of major insurance companies use CVM products for prime and Tier 2 reporting, which will make it much easier to complete the Insurance Supplier Diversity Survey successfully.
From data enrichment and analysis backed by nearly 300 databases to explore, our supplier discovery tool, to Tier 2 solutions, to experts who can help you start your supplier diversity program, CVM has the tools to help you comply with MIDS. Contact us to get started before July 1, 2020.