Mutual insurers represent an important and growing sub-segment of the overall insurance market, with some of the most prominent and successful brands in the industry. Just as the strategic priorities of stock carriers are changing, mutuals also face an evolving landscape, with fast-rising customer expectations, new competitive threats and disruptive technologies.
EY conducted an extensive scan of the mutual market during 2020. Specifically, we looked at how mutuals of all sizes and types devise and operationalise purpose-led strategies to differentiate themselves and foster growth. Indeed, mutuals seem uniquely well-positioned as purpose and long-term value creation become strategic imperatives for the entire industry, particularly relative to the ESG agenda.
From our research, we identified four core principles that differentiate mutual insurance companies from stock carriers. Collectively, these principles represent a strategic playbook for mutuals to find success in the dynamic, technology-enabled and purpose-led insurance industry of the future.
Purpose-led strategies prioritise long-term thinking and value over profitability.
Following the pandemic, more insurers are thinking beyond their bottom lines, measuring performance in ways that account for stakeholders beyond financial shareholders and investors (e.g., customers, employees, the environment). Such purpose-led strategies are not new to mutuals, but some are embracing and articulating them to a greater extent than in the past.
Some strategies and operating models seek to serve a specific community in alignment with specific goals, such as improving human wellness or optimising member value. Today’s purpose-led strategies are distinct from past corporate social responsibility programmes in that they directly correlate to financial performance. Strategic key performance indicators (KPIs) measure long-term value and overall impact, which link back to financial results.
Member centricity requires owner engagement models unique from standard customer engagement models.
Because mutual insurers view their customers in fundamentally different ways than stock carriers, they have different engagement and service models. For instance, many successful mutuals involve members in governance decisions and regularly ask members about their needs and preferences. This is how mutuals show that their members matter.
Customer centricity is essential for all types of insurers to compete. Increasingly, it is the principle that defines experiences across the value chain for members that purchase and own mutual products. By overtly leveraging owner centricity, however, mutuals can distinguish themselves from competitors that claim to “focus on the customer”. By involving members in decision-making around strategic direction and de-emphasising profitability, mutuals can treat members as owners and adopt a longer-term view toward creating value.
Value creation for core and peripheral member segments is critical to growth and innovation.
Like other carriers, mutuals win or lose based on their ability to generate value for their members. Ideally, financial benefits align directly to purpose-led strategies, with a focus on distributing surpluses to owners or providing cash back to customers and members. Some mutuals adjust the benefits they provide by segmenting customers based on profitability or projected lifetime values. Such tiering has proven effective in increasing loyalty and engagement.
Social and economic change across local communities and underserved segments is fundamental to brand and purpose.
Successful mutuals embrace not-for-profit philosophies focused on core social issues, with products and community activities directly linked to these issues. In addressing the needs of underserved consumers, mutuals often use social KPIs (e.g., percentage of insureds who are minorities or have incomes below the poverty line) as individuals in these groups are often excluded from insurance services.
The bottom line: the market moment for mutuals
Now is the time for mutual insurers to be bold with their growth strategies and harness the differentiating power of their purpose and customer-centricity.