The Blind Spot in Achieving True Diversity in the Actuarial Profession

Financial services firms have been investing millions in diversity initiatives over the past decade. However, without robust metrics, the class dimension of workplace inequality remains largely invisible.

This can create barriers to innovation, risk management and market understanding. The consequences are tangible. Homogeneous leadership teams miss risks that diverse perspectives can surface, struggle to understand diverse customer bases and perpetuate recruitment practices that exclude top talent based on background rather than capability.

This year, the Actuaries Institute is partnering with MNC Actuaries on diversity and inclusion initiatives. The MNC team brings decades of experience across life insurance, reinsurance and superannuation, combining technical actuarial expertise with a commitment to building diverse, high-performing teams.

MNC Actuaries has consistently built high-performing actuarial teams across multiple sectors. Through this work, we've seen first-hand how socio-economic diversity strengthens both technical capabilities and client outcomes. Our recruitment experience across financial services has given us a front-row view of the barriers that exist and the genuine competitive advantages that come from removing them.

Making the case for inclusion

Socio-economic diversity drives business performance in ways that traditional diversity metrics often miss. Organisations with genuine class diversity demonstrate superior outcomes across critical business functions:

• Enhanced risk management: Teams with diverse socio-economic backgrounds identify risks that homogeneous groups overlook, particularly those affecting lower-income customer segments.
• Improved innovation: Professionals from varied backgrounds bring different problem-solving approaches and market insights that drive product development and service delivery improvements.
• Stronger customer connection: Organisations serving diverse markets need employees who understand varied customer experiences and financial realities.

If we take the UK, as an example, the Financial Conduct Authority recognises a lack of diversity as a governance and innovation risk, which represents regulatory attention that Australian firms should also anticipate. Forward-thinking organisations are positioning socio-economic inclusion as a competitive advantage rather than waiting for compliance requirements.

Understanding diversity

Socio-economic diversity captures the differences in individuals' social class and financial situations. These differences profoundly influence career opportunities, workplace progression and professional networks. The most reliable international benchmark measures parental occupation at age 14, offering practical and comparable data that other indicators struggle to match.

While other indicators exist, they tend to be less reliable or carry lower response rates. These weaknesses (in a UK specific context) can be seen below ^[1] :

Source: UK Government. (n.d.). Simplifying how employers measure socio-economic background: An accompanying report to new guidance. GOV.UK.

Research reveals that progression isn't purely merit-based. Unwritten rules and cultural norms consistently favour those from backgrounds similar to those of senior leaders. These barriers include expectations around unpaid internships, networking in expensive venues, cultural capital assumptions and communication styles that reflect class rather than competence. The chart below shows the top barriers to social mobility in a UK survey by Co-op ^[2] .

Source: Talk Business. (2024). Socioeconomic backgrounds a barrier to opportunity for 7 in 10 people in the UK.

These barriers may go unnoticed by those in majority groups, but they perpetuate exclusion and underrepresentation.

Socio-economic status significantly shapes an individual’s career trajectory, including in professions like actuarial science. Yet, the class dimension of workplace inequality is often overlooked.

Social mobility refers to movement between social classes, measured by changes in occupation, income, or education, and includes intergenerational shifts from parents to children. It is shaped by factors like education, family background, and social policies.

Wealth mobility, by contrast, focuses specifically on movement between economic levels, based on income and wealth accumulation, showing how economic status affects one's social position.

Both concepts are crucial for understanding societal structures and addressing inequalities, as they highlight the interplay between social and economic factors that shape individuals' opportunities and outcome ^[3] .

Australia’s mobility reality

While Australia ranks highly for income mobility internationally, wealth mobility tells a different story.

Wealth tends to be 'stickier' than income ^[4] , with people experiencing far lower levels of wealth mobility over their lifetimes. When income is adjusted to account for wealth, over 40% of people in the top or bottom two deciles in 2001 remained there in 2022.

Source: Productivity Commission. (n.d.). Fairly equal? Economic mobility in Australia. Australian Government.

The Productivity Commission's research reveals persistent inequality. Almost 15% of people with parents in the bottom income decile remain there, while only 6% reach the top decile. Conversely, 20% of those from top-income families stay in the highest bracket.

These patterns stem from three key factors that perpetuate advantage: 

1. Human capital investment differences in education and health
2. Location and social network disparities that affect access to opportunities and; 
3. Family characteristics, including stress levels and early learning outcomes that shape long-term prospects.

Source: Productivity Commission. (n.d.). Fairly equal? Economic mobility in Australia. Australian Government.

The actuarial profession’s challenge

As an example, data from the UK Institute of Actuaries ^[6] exposes stark underrepresentation - only 20% of actuaries come from working-class backgrounds, compared to 37% in the general population. Even among new entrants, these numbers barely shift, revealing entrenched systemic barriers.

Source: Institute and Faculty of Actuaries. (2023). New capital consensus: The investment system and how actuaries impact it. IFoA Thought Leadership Series: Alternative Economic Thinking.

Note: The Employees (senior level) UK average bar has been updated following an Office for National Statistics release ^[7] in August 2003 with this information. This was not available in the original presentation. Australian data remains limited, but available research on cultural diversity in financial services suggests similar patterns. 

A 2022 study ^[8] of Big Four bank employees showed higher Black, Indigenous and Person of colour (BIPOC) representation in the respondents (61%) compared to in the general population (21%), yet significantly lower representation in senior roles (15%/17%) - indicating that barriers to progression barriers  were still present even though entry to the profession had been improved.

In a similar UK study ^[9] it was found that employees from lower socio-economic backgrounds took 25% longer to progress through grades. This ‘progression gap’ increases to 32% when considering those from lower socio-economic backgrounds who also identify as Black. This ‘progression gap’ cannot be explained by performance. There was no statistical evidence to link performance with socio-economic background.

In the actuarial profession specifically, unnecessary barriers persist. Degree requirements for entry-level positions may exclude capable candidates, while limited school outreach means students rarely encounter actuaries as career role models. These structural impediments prevent organisations from accessing diverse talent pools.

Solving for inclusion

Organisations serious about socio-economic inclusion could consider implementing systematic approaches that address root causes rather than symptoms. These include:

• Measurement and monitoring: Establishing baseline socio-economic composition using parental occupation data, then tracking progression rates across different backgrounds. Without measurement, improvement efforts lack direction and accountability.
• Recruitment revolution: Partnering with state schools and technical colleges to create apprenticeship pathways. Redesigning interview processes to focus on aptitude over accent, and eliminating unpaid internship requirements that exclude working-class candidates.
• Strategic mentorship: Implementing cross-background mentoring that intentionally pairs senior leaders with talent from diverse socio-economic backgrounds. This approach dismantles structural advantages while developing leadership pipeline diversity.
• Workplace culture transformation: Addressing subtle barriers like expensive networking events, unclear advancement criteria and communication style expectations that favour particular class backgrounds. Creating inclusive professional development that recognises diverse paths to competence.
• Leadership accountability: Integrating socio-economic diversity metrics into leadership performance evaluations, ensuring senior teams demonstrate measurable progress on inclusion outcomes.

Regulatory and risk considerations

As Australian regulators increasingly focus on diversity and inclusion, particularly following international precedents, organisations that proactively address socio-economic barriers will be better positioned for evolving compliance requirements. APRA and ASIC guidance continues to expand diversity expectations, making early action strategically prudent.

From a risk management perspective, socio-economic homogeneity creates blind spots in customer understanding, product development and market assessment. Organisations serving diverse populations need employees who understand varied financial realities and decision-making contexts.

Call to action: Leading the change

Socio-economic diversity represents both a moral imperative and strategic advantage. Professionals who have experienced different economic realities bring unique problem-solving skills, market insights, and customer empathy that homogeneous teams cannot replicate. Research consistently shows that diverse teams outperform in complex problem-solving, a crucial capability for financial services organisations operating in dynamic markets.

As guardians of financial fairness and long-term risk assessment, actuaries are uniquely positioned to lead this transformation.

Organisations that act now will build a talent pool that is better able to read risks, markets and boost innovation. Measure what you might be missing.

At MNC, diversity isn't an initiative; it's how we build every project team. Whether combining client and MNC employees or seconding consultants to client teams, we know that recognising all aspects of diversity drives better outcomes, fosters innovation and delivers better outcomes for our clients.

It’s clear that the actuarial profession can't keep relying on traditional diversity metrics while ignoring the socio-economic dimension. Leaders should:

• Look hard at where socio-economic barriers show up in recruitment.
• Build class diversity initiatives into existing diversity programs.
• Track socio-economic diversity the same way you'd track any business performance metric.

If you're ready to build genuinely diverse, high-performing actuarial teams, MNC Actuaries can help you fill the gaps, either on an advisory basis or by finding the talent to complement your existing people.

References

^[1] UK Government. (n.d.). Simplifying how employers measure socio-economic background: An accompanying report to new guidance. GOV.UK. https://www.gov.uk/government/publications/understanding-a-workforces-socio-economic-background-for-change/simplifying-how-employers-measure-socio-economic-background-an-accompanying-report-to-new-guidance

^[2] Talk Business. (2024, November 14). Socioeconomic backgrounds a barrier to opportunity for 7 in 10 people in the UK. https://www.talk-business.co.uk/2024/11/14/socioeconomic-backgrounds-a-barrier-to-opportunity-for-7-in-10-people-in-the-uk/

^[3] Bridge Group. (n.d.). Socio-economic diversity in the financial services. https://www.bridgegroup.org.uk/socio-economic-diversity-in-the-financial-services

^[4] McLeod, S. (n.d.). What is social mobility? Simply Psychology. https://www.simplypsychology.org/social-mobility-definition.html

^[5] Productivity Commission. (n.d.). Fairly equal? Economic mobility in Australia. Australian Government. https://www.pc.gov.au/inquiries-and-research/fairly-equal-mobility/

^[6] Institute and Faculty of Actuaries. (2023, April 18). New capital consensus: The investment system and how actuaries impact it. IFoA Thought Leadership Series: Alternative Economic Thinking. https://vle.actuaries.org.uk/pluginfile.php/136190/mod_resource/content/2/slides%20%281%29.pdf  

^[7] UK Government. (n.d.). Simplifying how employers measure socio-economic background: An accompanying report to new guidance. GOV.UK. https://www.gov.uk/government/publications/understanding-a-workforces-socio-economic-background-for-change/simplifying-how-employers-measure-socio-economic-background-an-accompanying-report-to-new-guidance

^[8] LinkedIn. (n.d.). Cultural diversity and inclusion in Australia's financial services industry - Summary findings and recommendations https://www.linkedin.com/pulse/cultural-diversity-inclusion-australias-financial-camy-wong-ca-mba/

^[9] Bridge Group. (n.d.). Socio-economic diversity in the financial services. https://www.bridgegroup.org.uk/socio-economic-diversity-in-the-financial-services