Ethics & Responsible Business Practices
Travelers established and maintains a Code of Business Conduct and Ethics, which applies to all of our employees, officers and directors and provides a comprehensive framework for sound ethical business decisions. The Code, which is also available in French for our employees located in Canada, provides principles for each employee to follow when acting on behalf of Travelers and sets forth our expectations on a number of topics, including conflicts of interest, compliance with laws, business ethics and use of corporate assets. Our Chief Ethics and Compliance Officer oversees communication, education and compliance with the Code. We also employ and train Legal, Compliance and Human Resources professionals to help our employees reach the right decision, regardless of the circumstances.
Our ability to achieve our goals of being the undeniable choice for the customer and an indispensable partner for our agents and brokers depends on our culture of honesty, integrity and accountability. Our commitment to transparency and integrity starts with our senior leadership. Our Chairman and CEO, Alan Schnitzer, sets the tone, including through regular companywide communications. Here’s an excerpt from one of his messages:
This approach remains critical to maintaining our culture of candor and continuing to deliver sustained value to our stakeholders.
We expect our suppliers to conduct themselves with the same level of honesty and integrity as our employees. The Travelers Supplier Code of Conduct documents our expectation that all contractors, consultants, suppliers and vendors demonstrate their commitment to ethical, humane, socially responsible and legally compliant business practices, including by maintaining a harassment-free and respectful workplace. We also proudly commit to the protection of human rights everywhere we do business, as described in our Human Rights Statement.
To learn how our ethical culture drives our ability to attract and retain talented, diverse and qualified employees, see our Human Capital Management and Diversity & Inclusion sections.
The Nominating and Governance Committee of the Board of Directors periodically reviews the Code of Business Conduct and Ethics and recommends changes to the Board, as appropriate. The Audit Committee, which has oversight responsibility for regulatory and compliance matters, receives a quarterly report on compliance matters, including Ethics Helpline activity. In addition, the Audit Committee meets in executive session with the Chief Ethics and Compliance Officer each quarter.
Ethics & Compliance Training & Awareness
Upholding a culture of honesty, integrity and accountability is critical to the long-term success of our organization. To support this culture, we promote ethics and compliance awareness across our operations. On an annual basis, our employees are required to complete our Ethics and Compliance Training and Certification program, which includes:
- Code of Business Conduct and Ethics Training and Certification. We require our employees to complete annual ethics training, which includes training modules on a variety of important topics, such as anti-bribery and anti-corruption. Additionally, our employees and directors must certify annually that they have reviewed, understand and agree to comply with the principles set forth in the Code.
- Policy Certification. We expect all employees to familiarize themselves with, and confirm their compliance with, applicable company policies. These policies include:
- Anti-Bribery and Anti-Corruption
- Information and System Use
- Equal Employment Opportunity
- Gifts to Government Officials
- Harassment-Free Workplace
- Internal Dispute Resolution
- Nepotism, Favoritism and Personal Conflict of Interest
- Respectful Workplace
- Security Trading for Employees
- Security Trading for Executives
- Social Media
- Supplier Management
- Whistleblowing and Non-Retaliation
Bribery and corruption are wholly inconsistent with our company’s core values of honesty, integrity and accountability, and we have instituted policies, procedures and internal controls for complying with anti-bribery and anti-corruption laws. Travelers strictly prohibits any promise, any offer or the provision of anything of value to any government official or any other person for the purpose of improperly obtaining or retaining business, influencing action or obtaining any form of improper benefit. We provide our employees with additional information regarding our expectations in our internal Anti-Bribery and Anti-Corruption Policy.
Additionally, we are committed to providing a fair and inclusive workplace where all employees are treated with dignity and feel valued, respected and supported. Among other things, we require our employees to complete harassment awareness training, and our Internal Dispute Resolution Policy allows employees to seek review of employment-related issues, concerns, actions and decisions. To learn more about our employee practices and programs, see our Human Capital Management and Diversity & Inclusion sections.
In our continuing efforts to raise awareness and educate employees regarding compliance and ethics issues, Travelers publishes a periodic “Dear Ethics” column on the company’s intranet site. We base the topics of the “Dear Ethics” column on real situations that the Travelers Ethics and Compliance Office has addressed and anonymize them for publication. The column’s goal is to address situations in a relatable fashion and offer concrete suggestions for how employees should act in various circumstances.
We provide employees with multiple channels to raise concerns, including the Human Resources, Employee Relations and Compliance functions and the Travelers Ethics Helpline. Our independently administered Ethics Helpline is available to employees and others 24/7 to report issues or seek guidance confidentially and anonymously. Trained professionals investigate each concern and, where appropriate, escalate it internally.
Once an Ethics Helpline report is filed, a review is conducted, if appropriate. Any ethics- or compliance-related issues are addressed by the Ethics and Compliance Office. Our Chief Ethics and Compliance Officer provides the Audit Committee with quarterly summaries of matters reported through the Ethics Helpline and more frequent compliance updates, as appropriate. Additionally, the Audit Committee receives reports on matters reported to the Chief Ethics and Compliance Officer that involve accounting, internal control or audit matters or that relate to any fraud involving persons with a significant role in our internal controls.
We also maintain a formal Whistleblowing and Non-Retaliation Policy that prohibits retaliation against, or discipline of, an employee who raises a concern in good faith.
Responsible Business Practices
The business of insurance involves a contractual arrangement in which the insurer agrees to bear a policyholder’s expected risk of future financial loss, subject to agreed limits, terms, and conditions in exchange for a premium. This requires insurers, such as Travelers, to design and price their insurance products based on expected risk of future loss. Under longstanding law and insurance industry practice, Travelers identifies risk factors and establish rates based on sound actuarial principles that do not — and may not — take factors such as race or other prohibited characteristics into account. Established principles of risk-based insurance underwriting and pricing allow insurance markets to function properly, fairly, and competitively. Ultimately, this approach benefits customers by increasing the availability of insurance at fair prices that appropriately reflect the related risks and ensures the financial solvency of insurers to pay covered claims decades into the future.
To estimate the risk of future loss, actuaries apply mathematics, statistics, and economic methods to estimate the probability and financial impact of various risk factors. The procedures through which rates are set are complex, but the theory behind the process is straightforward – insurance actuaries and underwriters seek (and are required by law) to determine risk factors that correlate with losses. This assessment of risk is designed to accurately identify the expected value of all future costs associated with risk transfer. Ultimately, the grouping of risks with similar characteristics is fundamental to any insurance system. Importantly, there are certain characteristics, including race, that insurers are legally prohibited from considering, and are not part of the process used by actuaries to establish rates.
Regulated domestically through state departments of insurance in all 50 states and the District of Columbia, the company’s operating subsidiaries, like other insurance companies, are subject to extensive state laws and regulations touching on all aspects of its business, including pricing and underwriting. Through its insurance subsidiaries, the Company offers hundreds of insurance products across many lines of business, each of which is subject to detailed legal and regulatory filings and state laws. Notably, rates are generally filed with, and reviewed and approved by, state insurance regulators, which uniformly require insurers to establish that their filed rates are “adequate,” not “excessive,” and not “unfairly discriminatory”, as those terms are defined under each jurisdiction’s laws. To ensure compliance with these well-established standards, these insurance regulatory authorities also perform periodic market conduct and financial examinations, in part to ensure that customers are charged premiums that are adequate and not excessive or unfairly discriminatory under the law.
In light of the heavily regulated environment in which it operates, Travelers has developed thoughtful and comprehensive underwriting and pricing policies and practices, including robust governance and controls designed to ensure that its pricing is actuarially sound and that its underwriting and pricing practices comply with all applicable laws and do not consider race or other prohibited characteristics. Key components of Travelers comprehensive governance and controls include:
- Underwriting and Pricing Policies, Practices & Governance
- Travelers Responsible Artificial Intelligence Framework
- Data Governance, including the use of Third-Party Data
- Awareness, Education and Training
- Internal Audit and Regulatory Oversight
- Enterprise Risk Management, Senior Leadership Accountability, and Board Oversight
Robust Underwriting and Pricing Policies, Practices & Governance
Risk-based underwriting and pricing practices and fair access to our insurance products are at the core of the insurance industry and the company’s business. To that end, and to ensure that the underwriting and pricing factors the company considers are predictive of risk and appropriate to use, underwriting decisions are made within a collaborative, structured, and cross-disciplinary approach. This approach includes: (i) extensive underwriting guidelines; (ii) a structured underwriting authority framework; and (iii) a quality assurance audit process. The extensive underwriting guidelines provide each underwriter with clear and established direction on how to properly evaluate risks. The highly structured underwriting authority framework, which ensures the appropriate underwriting rigor and discipline are applied, requires collaboration at both the transactional and portfolio level. The company’s underwriting audit process confirms compliance with our policies and underwriting framework and includes both quality assurance audits and targeted reviews to verify, among other things, appropriate risk selection, underwriting quality, and compliance with best practices and controls. Among these controls are the company’s policies establishing that it will comply with all applicable laws, including laws prohibiting discrimination based on any legally protected characteristic, including race.
With respect to pricing, the company’s credentialed actuaries are professionally certified and, in the United States, must be members in good standing of the Casualty Actuarial Society. Among other things, this requires adherence to the applicable code of professional conduct, adherence to the applicable jurisdiction’s qualification standards and participation in the applicable actuarial boards for counseling and discipline. The qualifications and standards are important because the Actuarial Standards of Practice, for example, provide that when U.S. actuaries are performing professional services such as designing, reviewing or changing risk classification systems, actuaries must comply with applicable laws, including those laws prohibiting the consideration of protected characteristics, including race.
As the company’s business practices have evolved, Travelers has also developed and employed advanced statistical processes – more commonly referred to as “models” – to assist it in the underwriting and pricing of its insurance products. Similar to the underwriting and pricing controls described above, the company also has robust governance and controls in place to ensure the integrity of its modeling practices, including verification that all risk factors used are actuarially justified as predictive of risk and comply with state laws.
As part of its practices, the company conducts comprehensive reviews of its models, running them through a multi-disciplinary process that includes, as appropriate, peer, legal, actuarial and data science assessments that span the entire model lifecycle. This well-established governance, which has been reviewed by the company’s lead regulator, is embodied in the Travelers Model Risk Management Framework. Critical elements of this framework include: (i) Travelers Modeling Guidelines, which provide overall guidance on the creation and lifecycle of models; (ii) a risk assessment tool, which is used to evaluate the risk level of each model; (iii) model checklists, which specify required risk mitigation controls based on the risk level of each model; and (iv) an inventory of models.
The Model Risk Management Framework addresses:
- data quality;
- compliance with all applicable laws and regulations;
- model explanation and documentation;
- appropriate peer and legal reviews of the model; and
- model implementation and post-model implementation monitoring.
To help ensure legal and regulatory compliance, Travelers reinforces and confirms that those involved in the modeling lifecycle follow the guidance and requirements of the Model Risk Management Framework. Through this process, model owners are expected to confirm that the model complies with the Travelers Modeling Guidelines, has been reviewed with the appropriate subject matter experts and has been signed off by peer and legal reviewers. Peer reviewers – within and across business lines – consider, among other factors, the data utilized, the data sources, the variables utilized, and the methodology utilized to select those variables to ensure they are appropriate and consistent with the Modeling Guidelines. Legal reviews are similarly designed to ensure compliance with applicable laws (including anti-discrimination laws) and regulations, as well as internal Travelers policies. These peer and legal reviews evaluate model use cases, data sources, risk assessment and the variables used in the models.
Responsible Artificial Intelligence Framework
As part of the constant evolution and maturation of Travelers’ governance framework, the company has also established a Responsible Artificial Intelligence (AI) Framework that sets forth foundational principles to guide our development and use of AI, advanced analytics, and modeling. The goal of this framework is to help ensure that we act responsibly and ethically – consistent with the responsible business values at the heart of our business and culture.
As depicted below, the framework consists of our core principles that describe how we use Artificial Intelligence: People-centric; Fair; Responsible; and Trustworthy.
Thoughtful Data Governance
The Travelers Enterprise Data & Analytics team, working with the company’s business segments and support functions, including Legal and Corporate Ethics and Compliance, strives to ensure that we appropriately manage our data, utilize accurate and reliable data, and implement thoughtful data governance across the organization. As discussed in further detail in the Harnessing the Power of Data section of this report, we have cultivated a data culture throughout the enterprise that emphasizes, through training and education, the importance of all employees taking ownership of data, understanding and protecting data, capturing and using data appropriately and making sure the data we use is accurate and timely. We also have established – and monitor adherence to – enterprise and business-line specific data governance policies and standards.
We have additional governance in place relating specifically to the third-party data we use to augment and/or enrich our own data. These processes and controls are designed to ensure the accuracy, completeness, consistency, timeliness and relevance of the third-party data and compliance with all applicable legal requirements, among other critical factors.
Targeted Education & Training with Respect to Responsible Business Practices
We require our employees who are involved in underwriting and pricing to take training on a regular basis with respect to the company’s underwriting and pricing policies. Moreover, we provide relevant employees with training regarding Travelers’ model governance requirements. For example:
- Model Governance. We employ a multifaceted approach to ensure that modelers are appropriately aware of, educated, and trained on our Model Risk Management Framework. Awareness and training start at the beginning of an employee’s tenure on a modeling team and continues throughout. We further reinforce this training and education by requiring all data scientists to complete a training knowledge check regarding the Model Risk Management Framework, and we obtain written confirmation that they have read and understood the various governance requirements.
- Data Governance. We create and support a data culture by raising awareness and providing training regarding the appropriate uses and management of data. Travelers’ data culture is focused on ensuring that we take ownership of data, understand data, protect data, capture data completely and make sure all data is accurate and timely.
Ongoing Internal Audit and Regulatory Oversight
Our Corporate Audit department performs ongoing testing and monitoring of the company’s internal control environment. This ongoing testing and monitoring includes reviewing controls related to underwriting, pricing, and model governance as well as data governance. On a quarterly basis, the company’s Chief Auditor reports to the Audit Committee of the Board with respect to the results of Corporate Audit’s work and its overall conclusions regarding the internal control environment.
In addition to our own internal audits, we are also subject to comprehensive supervision and regulation by insurance regulatory authorities in the states in which the company operates. For example, rates are generally filed with, and reviewed and approved by, state insurance regulators, which uniformly require insurers to establish that their filed rates are adequate,” not “excessive,” and not “unfairly discriminatory” as those terms are defined under each state’s laws. In addition to these rate filings, these insurance regulatory authorities also conduct periodic financial examinations and market conduct examinations, in part to ensure that regulatory requirements are satisfied and that customers are charged premiums that are adequate and not excessive or unfairly discriminatory under the law.
Numerous state legislators and regulators have also been actively evaluating the issue of race in insurance, as this is a topic that must be addressed on an industrywide basis. For example, in July 2020, the National Association of Insurance Commissioners (the “NAIC”) established the Special Committee on Race and Insurance to study whether current practices in the insurance sector may potentially disadvantage minorities and, if so, to make recommendations to address those practices. In addition, in 2023, the NAIC plans to provide recommendations to applicable regulators and the insurance industry as to how to address race in insurance. In her statement to the U.S. Senate in September 2022, the Chair of the NAIC committee leading this work testified that “there is considerable activity by state insurance regulators” and specifically outlined numerous initiatives actively being undertaken by the NAIC on the intersection of insurance and race.1 The company continues to monitor and track these developments as well as communicate with regulators to ensure that Travelers is not only complying with all applicable laws but also partnering on this important work.
Effective Enterprise Risk Management, Senior Leadership Accountability, and Board Oversight
As part of the Enterprise Risk Management framework, risks are assigned to senior leadership risk owners who have accountability for establishing appropriate processes and monitoring. Additionally, pursuant to its charter, the Risk Committee of the Board of Directors is responsible for overseeing “the strategies, processes and controls pertaining to the underwriting of insurable risks and the pricing of such risks,” including the processes and controls that are designed by management to ensure that pricing is actuarially justified as predictive of risk and complies with applicable state laws. For more detailed information about the Board’s oversight process, see the Capital & Risk Management section of this report.
1 Testimony of Kathleen A. Birrane, Maryland Insurance Commissioner, On Behalf of the National Association of Insurance Commissioners (Sept. 8, 2022).
Our Drivers of Sustained Value
[L]et me take this opportunity to restate a few important things:
• First, our reputation is our most valuable asset, and each of us has a role to play in protecting our good name. No gain is worth sacrificing our reputation.
• Second, we can never let our drive to deliver industry-leading results cloud our ethical judgment. No outcome is worth unethical behavior.
• Third, the only long-term, sustainable success in business is achieved in partnership with our employees, agents, brokers and customers – never at their expense.
• Fourth, we have the skill and creativity to solve any problem and meet any challenge. But we can only solve problems and meet challenges if we’re honest with ourselves and each other about what those problems and challenges are.
— Alan Schnitzer, CEO