Employee Culture: The New Risk Predictor

While companies have long focused on customer commentary, workforce signals can be an even more important indicator of risks within an organization.

(Image credit: Tiger Lily/Pexels.)

We have all heard the infamous quote that “culture eats strategy for breakfast.” But have we used culture to reveal potential risks and areas of business opportunities within organizations?

Employee perception and review data hold a vast amount of undetected signals and potential weaknesses in an organization. These insights can be particularly helpful for the insurance underwriter space. Elevating the relevance of employee perception in areas such as property, product liability, and management errors & omissions (E&O) could create significant bottom line implications for both companies and those who are underwriting their operations.

More than 40 percent of employees regularly share information and perspectives about work online, with more than 50 percent post on social media weekly. We are seeing close to one million new reviews posted each month by employees. With the exponential text-based data from online and social media platforms, the workforce is increasingly comfortable with sharing information that in the past were considered either personal or ill-mannered. This reflects a growing trend towards transparency—and possibly a desire to give greater leverage from employees. While companies have long focused on customer commentary, workforce signals as an equally important source of meaningful business intelligence is as, if not even more important to monitor and pay attention to.

For the insurance sector, there are key areas of workforce data that appear anecdotal on the surface, but as an aggregate provides powerful insights to illuminate potential or unforeseen risks within an organization. Here are four areas to explore:

Leadership Honesty & Ethics

Leadership honesty and ethics refer to the adherence to moral principles and standards by those in management positions. This aspect of workforce data matters immensely as it sets the tone for the company culture and can greatly influence employee morale and engagement. High honesty and ethical standards in leadership are often correlated with higher levels of trust within the organization, which can directly affect the retention rates, productivity, and overall reputability of the company. Leaders perceived as ethical by their workforce can drive a strong risk management culture, affecting the organization’s risk profile and, consequently, its insurance premiums and coverage terms.

Aggregate Employee Sentiment on Company Values

The aggregate sentiment on company values captures how employees feel about the principles and standards that the company professes to uphold. This is significant because it can signal alignment or more urgently, misalignment between the organization’s stated values and its operational reality. When employees believe in and resonate with the values of their company, it often leads to enhanced job satisfaction, loyalty, and a reduction in workforce-related risks. Conversely, a disconnect may lead to internal disagreements, lower morale, and heightened reputational risks, all of which are of great interest to insurers assessing organizational stability.

Compliance Flags and Risk

Compliance flags in legal or regulatory adherence are foundational for insurers to predict risks and future claims related to non-compliance with industry standards, laws, or internal policies. High rates of compliance flags may suggest systemic or programmatic issues that could increase the likelihood of litigation, fines, or reputational damage. Leveraging aggregate employee sentiment regarding a company’s compliance policies, procedures and training can bring an additional factor into assessing risk. This data can augment assessments in new ways, equipping insurance companies to better estimate the risk-profile and adjust the policy terms or premiums accordingly.

Employee Safety Call Outs

There are now more channels for employees to raise concerns about hazards or lack of protocol in the workplace that could compromise personal or collective safety. These call outs are particularly relevant to the insurance sector as they provide direct insight into the potential for workplace injuries or accidents. A higher frequency or severity of safety concern postings in company reviews could indicate a higher risk of claims stemming from workplace incidents. Monitoring and incorporating this data enables insurance providers to bring additional insights to gauge the effectiveness of a company’s health and safety policies, ultimately influencing coverage options and cost.

The Takeaways

Uncovering these new data sets and insights for risk assessments and underwriting processes is the first step. The power really comes into play with identifying trends and friction points that indicate concerns that could lead to bottom line and reputational impact for the organization.

Here are five actionable ways to leverage the information:

  • Refine Risk Models with Real-Time Data Analysis: Incorporating the above text-based data specific to leadership ethics, aggregate sentiment, compliance flags, and employee safety data in your predictive models can help underwriters estimate the probability of future claims more accurately. In addition, building in machine learning algorithms to identify trends and anomalies in real-time can enable dynamic adjustments to risk models and insurance premiums.
  • Custom Policy Structuring and Premium Pricing: Offer differentiated coverage based on aggregate workforce sentiment and compliance data. Companies with strong values alignment and low compliance issues could receive more favorable policy terms and pricing. By introducing incentive structures in policy pricing for clients who demonstrate proactive improvement in safety or ethical standards based on regular data analysis can create a new differentiator for your company.
  • Enhanced Due Diligence for High-Risk Clients: Identify potential red flags by cross-referencing internal compliance issues and employee sentiment along with overlaying external online reviews and media reports to find patterns. For clients with significant risks in leadership ethics or workplace safety, you can conduct deeper audits to uncover hidden liabilities and customize risk mitigation strategies, helping clients reduce their exposure.
  • Support Risk Mitigation and Safety Programs: Collaborate with clients to further improve their internal controls and safety protocols based on identified workforce data trends uncovered. By creating transparency in the process, clients can identify key areas of improvement that directly impacts employee morale and safety practices, leading to targeted training programs or consulting services to address compliance, ethical leadership, and safety management.
  • Reputation Management and Crisis Preparedness: Through employee feedback and sentiment analysis, help clients improve their reputation by identifying potential sources of reputational risks. This could provide you with added value as a partner to support crisis preparedness plans for clients to mitigate the impact of potential ethical violations, compliance breaches, or safety incidents on public perception.

By leveraging new data layers of employee reviews and sentiment, underwriting and risk management processes can become more dynamic and responsive, reducing overall risk exposure benefiting the bottom line and strengthening client relationships long term.

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Pam Cohen //

Pam Cohen, Ph.D. is Chief Product Officer, Aniline, a workforce insights company, powered by generative AI, that helps organizations measure impact and reputation risk through employee sentiment data.

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