Industry Collaboration and Trends in Charitable Giving
Charitable giving in the American insurance industry has become a topic of interest, prompting McKinsey's Insurance Practice to partner with the Insurance Industry Charitable Foundation. Their collaborative effort aimed to assess the state of charitable giving in the industry and identify trends that can enhance its impact. This research follows up on the foundation's previous work in 2011 and 2015, with a focus on highlighting opportunities for greater philanthropic success.
The survey, encompassing 22 companies, including insurers and brokers responsible for over $200 billion in premiums, revealed several noteworthy results:
1. Industry support for collaborating on a single cause:
The survey indicated a significant increase in support for industry collaboration on a single cause. In 2019, 33 percent of respondents expressed support, compared to 17 percent in 2015. Even those who didn't explicitly support a single cause expressed openness to collaborating on "causes that are business related."
2. Consistent levels of giving with a focus on key areas:
Charitable giving within the industry has remained steady since 2015. The consolidation of companies engaged in corporate giving has contributed to this stability. Insurers have also shifted their philanthropic efforts toward volunteerism, resulting in industry-wide giving ranging between $560 million and $600 million in cash, grants, and other donations. Education, health and social services, and community initiatives continue to receive significant attention.
3. Balancing business needs, stakeholder interests, and community needs:
Companies now recognize the importance of considering a balance between business needs, stakeholder interests, and community needs when designing their charitable programs. In 2019, 22 percent of respondents identified each of these three factors as their top consideration. This alignment facilitates a strategic approach to giving, allowing insurers to integrate philanthropy with their core business offerings. For example, property and casualty providers can focus on disaster relief efforts, merging their giving with their business expertise. Additionally, 95 percent of respondents set their contribution budget periodically, and 87 percent give to preselected causes and charities.
4. Increased focus on measuring the impact of charitable giving:
More companies are now using key performance indicators (KPIs) to evaluate the benefits of their philanthropic activities. The survey revealed a rise from 26 percent in 2014 to 41 percent in 2019. Moreover, there is a growing interest in engaging third-party organizations to measure the impact of philanthropy accurately.
5. nfluence of millennial preferences on charitable giving:
Millennials are shaping the landscape of charitable giving within the insurance industry. They exhibit a strong preference for working for companies actively involved in charitable causes, emphasizing their desire to make a social impact through their work. Millennials also tend to share their values and volunteer experiences on social media platforms. This inclination towards volunteering rather than monetary giving aligns with their commitment to social causes.
6. Shifting roles in charitable giving:
The role of the CEO in charitable giving has evolved over the years. CEOs are now primarily focused on setting the direction for giving programs and effectively communicating these efforts to internal stakeholders. Leaders specializing in charitable giving, such as chief giving officers and corporate foundation heads, have become the primary decision-makers and strategists.
The survey yielded several key findings:
1. Meeting public expectations:
A larger percentage of respondents believe that the industry's charitable giving meets the expectations of the public. Cash donations or grants continue to constitute the majority of giving, representing 65 percent of total funding. Notably, company-organized employee volunteering has experienced a significant increase from 0 percent in 2015 to 17 percent in 2019 among respondents who participated in both
2. Top causes for giving:
The industry's primary focus areas for charitable giving remain health and social services, community initiatives, and education. However, within these three areas, contribution to community causes has increased from 11 percent to 22 percent, while contribution to education has decreased from 34 percent to 22 percent. Meanwhile, giving to health or social services has remained consistent.
3. Geographical considerations:
Roughly 30 percent of respondents prioritize giving to communities where employees live and work, as well as areas where significant business operations are already established. Although the top three factors influencing corporate giving focus have remained unchanged since 2011, respondents' alignment with business needs has increased from 14 percent to 22 percent.
4. Shifting goals:
Organizations have transitioned from focusing on improving customer relations to building employee and leadership capabilities and skills. This shift in priorities reflects the values of millennial employees, who value personal growth and development.
Embracing the Influence of Millennials
Insurers are increasingly embracing the influence of millennials on charitable giving. The industry is responding to trends that emphasize personal passion, volunteerism, and the desire to work for socially responsible companies. Recognizing this, insurers have taken specific steps to align their philanthropic efforts with millennial preferences:
1. Greater employee engagement:
Insurers are prioritizing employee-focused giving strategies, with a special focus on engaging millennials. This approach capitalizes on their enthusiasm for supporting philanthropic causes that align with their personal interests.
2. Measurement of philanthropic impact:
The industry is placing increased emphasis on measuring the impact of philanthropy. By identifying and building on charitable successes, insurers can refine their metrics and giving standards, ensuring that their efforts create meaningful change.
3. Evolving roles:
Insurers are rethinking the roles within their giving organizations. As CSR leadership and employee-driven engagement become more prevalent, CEOs are shifting their focus to setting broad directions for charitable efforts. Meanwhile, CSR teams and corporate foundation leaders take on more strategic responsibilities.
4. Collaborative industry approach:
Insurers should consider the value and benefits of a united, collaborative industry approach to corporate social responsibility (CSR). By aligning CSR efforts with business objectives and creating value for all stakeholders, the industry can support common causes and amplify their impact.
Enhancing the Future of Charitable Giving
While charitable giving within the insurance industry has remained consistent, there is a growing emphasis on the importance of CSR. Insurers now treat CSR as a vital function, granting charitable-giving leaders increased decision-making power. This enables insurers to be more responsive to stakeholder needs, such as providing volunteer opportunities for employees and collaborating with the industry on philanthropic initiatives. By expanding efforts to track and measure the effects of philanthropy, CSR leaders can identify areas of focus and showcase successes backed by data and institutional resources. These accomplishments will pave the way for transformative initiatives that benefit the industry, employees, and, most importantly, communities.