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EY Global InsuranceMutual Market ScanKey principles of mutual differentiationSeptember 2021
Our approach: global mutual and cooperative market scanEY conducted an extensive scan of the global insurance sector between 2019-2020 to understand what sets mutualand cooperative insurers apart from stock carriers, and how mutuals can drive and operationalize a purpose-ledstrategy to differentiate and accelerate growth.10regions with mature mutualinsurance market shareassessed for deep dive140participants across 35 countriesinvolved in benchmarking survey50 mutual case studiesanalyzed globallyPage 1EY Global Insurance Mutual Market ScanMutualdifferentiationprinciples
Methodology: market and organizational insightsThe principles of mutual differentiation were established from market and organizational insights. These insights wereobtained through 1) collaborating with the EY global network of subject-matter advisors, 2) EY Global benchmarkingsurvey on mutuality, 3) assessed maturity of deep-dive markets, 4) 30 mutual case studies analyzed across themutual framework.Market insights Eleven markets, chosen because of their mature mutual insurance industries, were investigated through insightsfrom EY global insurance leaders and supplemental research, and from conducting a global benchmarking surveywithin EY across 36 countries with 110 participants. Five markets, which ranged in their degree of comparability to the Canadian market, were chosen for a furtherdeep-dive to obtain organizational insights and assess the maturity of the market across framework focus areas.Organization insights Thirty-plus mutual companies across the deep-dive markets were chosen for analysis across the mutual frameworkand maturity model because they were identified as leading examples of mutuality in a specific area of ourframework. Themes were identified through combining the organizational and market insights, which led to four overarchingprinciples that differentiated mutuals from stock carriers.Page 2EY Global Insurance Mutual Market Scan
Mutuality differentiation, themes and focus areas1Principle of mutual differentiationA fundamental truth that serves as the foundation and belief onthe purpose and differentiation of mutuality.Themes23Frequently observed patterns across markets that validate initialhypothesis of how mutuals operate across the framework components,or provide new insights on how mutuals consistently operate.Mutual framework areas of focus*Policyholder/member engagement, financial benefit, communityorientation, value-add services, governance and funding structure,product and policy differentiation, portfolio strategy and innovation.*NB on differences in terminology — use of “member,” “owner” and “customer”: Based on the results of our scan, an underlying theme surfaced that mutuals globally refer topolicyholders as members, which implies both customer and owner. Customer is the underlying policyholder who interacts with the organization’s insurance product and its direct andindirect services, thus accruing benefits in their day-to-day lives. Owner is a stakeholder concerned with the governance, strategic and financial direction of the organization. Thisdistinction is reflected throughout this document.Note that our mutual framework also evolved as a result from policyholder engagement to member engagement (to imply focus on both customer and owner).Page 3EY Global Insurance Mutual Market Scan
The four principles of mutual differentiation defined1Driving a purpose-ledstrategy is rooted inlong-term thinkingand value, overprofitability.Page 423Being member-centricrequires an ownerengagement model thatis unique fromcustomer engagement.Value creation for coremember segments andits periphery is criticalto achieving growthand innovation.EY Global Insurance Mutual Market Scan4Social and economicchange across localcommunities andunderserved segmentsis fundamental to brandand purpose.
Principle 1Driving a purpose-led strategy isrooted in long-term thinking andvalue, over profitabilityPage 5EY global insuranceEY iplesScanof mutuality
Principle 1: underlying themesPrinciple and underlying themes1Driving a purpose-led strategy is rooted in longterm thinking and value, over profitability Long-term value orientation: Purpose-led strategyand operating model reflect community giving andfocus on four pillars: human wellness, member value,societal impact, ecosystem productivity. Operational initiatives and activities reflectpurpose-led strategy: Activities are designed toembed purpose-led strategy and four pillars in valuecreation through value-add services focused onincreasing engagement and experience of membersand filling a service need in the community, overrevenue generation. Measurement of long-term value through strategicKPIs: Four pillars of long-term value are reflected instrategic KPIs, which measure overall impact and aretied to financial results.Page 6EY Global Insurance Mutual Market Scan
Principle 1: long-term value pillars and corresponding metricsPILLARSFOCUS AREASMETRIC CATEGORIESVALUE DRIVERVALUEHuman capital deploymentHumanwellnessEmployee health Training hoursPerformance reviewsPeople surveysWellness participation Socially responsible investmentsFoundation grantsReal estate certificationsCommunity affinityPercent of charitable givingDiversity percentage Lowers employee costExpense ratio Drives employee andcustomer affinity andmitigates riskCost avoidancePurpose, strategy, culture, governanceOrganizational cultureEnvironmentSocietal impactRegulatoryEthicsInnovation/growthMember valueConsumer trust NPS growth percentageCustomer satisfactionInnovation metricsTotal net trust score Increases customer affinityresulting in market shareand pricing powerConsumer healthDistribution productivityEcosystemproductivityInvested assetsEcosystemPage 7Market share/salesProfit from operationsUnderwriting margin RBC ratioDistribution costsInvestment returnsPercent of start-ups in ecosystemStrategic data ROINet investment income EY Global Insurance Mutual Market ScanMaximizes capital usage,optimizes distribution costsand enhances employeeproductivityLiquidity and FCFCapital optimization
Principle 1: common value-add services provided by mutuals and stock carriers CanadaLoss prevention review and recommendations for membersHouse call policy salesWealth managementRetirement planningSME risk assessment and coaching UKFinancial advice and planning and educationHealth and wellness counselingLegal adviceSupport to customers in extraordinary situationsTravel agency servicesWell-being programsUS Roadside assistance — standard with all auto policies (personal andcommercial) Retirement planning and banking/asset management — limited, with manymutuals exiting these services due to complex regulatory requirements andcapital Supplemental accident and health FranceFinancial planningInvestment adviceHome surveillanceNotification of weather events and prompts to change travel plans or securetheir propertySwitzerlandAustralia Financial advice and planning Retirement financial planning and advice to dependent survivors of theirlife and pension insurance products Risk advice for commercial and service companies Legal advice (personal and business)Page 8 24-hour legal assistanceProfessional development opportunities (professional workshops, webinars)Well-being programsRoadside assistance with free installation of tires and batteriesHome/car repair serviceRisk management services (medical professionals)Provide environment where medical professionals can share risk experiencesEY Global Insurance Mutual Market Scan
Principle 2Being member-centric requires anowner engagement model that isunique from customer engagementPage 9EY global insuranceEY iplesScanof mutuality
Principle 2: underlying themesPrinciple and underlying themes2Being member-centric requires an ownerengagement model that is unique from customerengagement Engaging members and community withingovernance decisions: Incorporating members andcommunity perspective into governance decisionspromotes stronger engagement and better focus onchanging community needs, which promotes quickerproduct and portfolio adaptation. Separate engagement strategies: Mutuals oftenrefer to their members as both customer and owner.However, there is a clear difference between ownerand customer as stakeholders, with differingengagement strategies.Page 10EY Global Insurance Mutual Market Scan
Principle 2: owner-centric and customer-centric strategiesA mutual member is both a customer and an owner; in mutual organizations, there are distinctions between owners and customers — particularly theirofferings and privileges — that exemplify a key source of differentiation.Mutual “member”Customer-centricCustomer centricity isfundamental to remain acompetitive player in theinsurance market, fornon-life and life productsand provide short-termshareholder return. It iscore to driving a seamlessand engaging experiencethrough the value chain(e.g., underwriting,claims, post-claims) formembers that purchaseand own mutual products.However, this is not adifferentiator ofmutuality.Page 11Owner-centric Continuous customer journeyengagement from underwriting to claims Focus on improving the experienceacross product acquisition, renewal andongoing claims services Communicate new products and processchanges Do not involve members in decisionmaking Decline customers that are high risk orperceived as unprofitable membersEngagement Premium reductions Internal discounts External discountsFinancialbenefits Part of governance structureAccept unprofitable membersCommunicate strategic plansInvolve in decision-makingEngage at annual general meetingsSelect tier of owners involved ingovernance decision Cash dividendsSurplus allocation to tier of membersInternal discountsExternal discountsEY Global Insurance Mutual Market ScanOwner centricity is whatdifferentiates mutuals,enabling these carriers toovertly leverage mutualityin their brands todistinguish them fromothers that “focus on thecustomer.” This centricitymanifests as seeing themember as an owner andtaking a longer-term focus,including involving membersin decision-making aroundstrategic direction, andmaintaining a more not-forprofit mindset.
Principle 3Value creation for core membersegments and its periphery iscritical to achieving growth andinnovationPage 12EY global insuranceEY iplesScanof mutuality
Principle 3: underlying themesPrinciple and underlying themes3Value creation for core member segments and itsperiphery is critical to achieving growth andinnovation Financial benefit and value creation: Memberfinancial benefit should have strong focus on threeareas: 1) surplus distribution to owners; 2) cash-backto customers; and 3) post-claim cost savings throughpartnerships. Distribution of financial benefits enablesdifferentiated ownership structure: Segmentmembers based on affiliation with specific groups andincrease distributions of financial benefits to tiers ofmembers aligned to purpose-led strategy.Page 13EY Global Insurance Mutual Market Scan
Principle 3: tiered customersSeveral mutuals identify tiers of customers based on the profitability of the products they hold and reward their high-value customers with surplus allocation.Value of tieringApproachTiering allows mutuals to identify and reward theirmost valuable members to increase loyalty andengagement.Mutuals identify their high-value members based oncurrent product profitability and perceived lifetimevalue (leveraging predictive analytics).Use cases:US auto insurer: In addition to regular cash dividends, the company provides surplus allocations to member tiers dependent on the product held. In2018, provided auto policyholders with a 5% credit on policy renewal, as well as a special 5% cash allocation.Large Swiss mutual insurer: Redistribute non-life profits on a two-yearly schedule, alternating between allocating a share of their profits to motorinsurance policyholders one year and to third-party liability/property insurance the next year through premium reductions.Large British mutual: Each year the board decides whether a dividend should be paid and which members should receive it, based in part on theproduct class held by the member.Page 14EY Global Insurance Mutual Market Scan
Principle 4Social and economic change acrosslocal communities and underservedsegments is fundamental to brandand purposePage 15EY global insuranceEY iplesScanof mutuality
Principle 4: underlying themesPrinciple and underlying themes4Social and economic change across localcommunities and underserved segments isfundamental to brand and purpose Not-for-profit philosophy: This includes focus on onecore social issue that is linked to product offering andlocal-led community sponsorship. This promotesstronger engagement and brand awareness, and ismanaged through corporate-owned investmentframework. Typically, face-to-face distribution is usedas a catalyst for local connectivity. Serving as a social curator in the community:Mutuals act as a curator between members, localbusinesses and the community through: 1)sponsorship of local businesses so they can betterserve the community, and 2) providing access andcoverage to underserved/marginalized segments.Page 16EY Global Insurance Mutual Market Scan
Principle 4: social KPIs to measure impact on marginalized communitiesExamples of social KPIs that can be used to measure the impact of initiatives on different underserved community segments.Percentageof insuredbelowpoverty lineMeasures the numbercommunity members insuredbelow the poverty line. Socialimpact of the initiative can bemeasured pre-/post-initiative.Page 17Percentageof minoritiesinsuredMeasures the contribution ofinsurance to equality amongminorities. Can be measuredpre-/post-initiative to assessimpact.Percentageof insured atretirementage or aboveIndividuals above the age ofretirement are often excludedfrom insurance services andmore likely to fall into povertyafter a disaster due to difficultyin finding work. Measuring thepercentage of insured atretirement age or aboveassesses the social impact ofthe initiative on this communitysegment.EY Global Insurance Mutual Market ScanSocialinvestmentratioMeasures the amount ofresources an insuranceprovider dedicates toinformation, education,communication andprevention in the localcommunity, for which nodirect financial returns areexpected.
Mutuality maturity modeland market-level assessmentPage 18EY global insuranceEY iplesScanof mutuality
Mutuality differentiation maturity model301Point ofdifferentiation2Hig maturityModerately matureCore competenciesVery low maturityLow maturityCommunityorientation Community orientation is not a primary Minimal partnerships/charityfocus and does not align with the coreinvolvement/engagement strategies.purpose and values of mutual. No core social issue in focus.Policy and productdifferentiation Product offerings are purely commodity Product offering provides some level of Products are tailored to niche customer Ongoing innovation in the productbased.addressing member needsneeds.strategy to address needs of the market Policy offerings are standardized across Innovation is not a focus for the Company looks to revise productsbased on the preferences of their nichecustomers.company (products are static withthrough a periodic innovation processmembers with pricing; decisions basedminimal customization).based on their understanding of marketon class of memberpreferences. Needs of clients are anticipated and Pricing is not based on class of member.addressed by company through ongoinginnovation cycle and engagement.Value-addservices Value-add services are not present orare not targeted to specific needs ofcustomers. Services offered are not strategic interms of company purpose or values.Page 19 Limited value-add services offered,services offered do notcomprehensively address customerneeds. Partnerships/charity Partnerships/charityinvolvement/engagement strategiesinvolvement/engagement strategiespresent with core social issue identified.present. Core social issue is center of focus;company aims to engage globally, aswell as locally. Value-add services align with productofferings and company purpose andstrategy.EY Global Insurance Mutual Market Scan Value-add services are targeted tocustomer needs and return oninvestment is considered by thecompany. Services offered contribute to anincrease in member engagement.
Mutuality differentiation maturity model301Point ofdifferentiation2High maturityModerately matureCore competenciesVery low maturityLow maturityMemberengagement No mutual branding; memberengagement strategy is unclear. Member engagement is not core focusfor the company. Differentiation not there betweenmember and owners. Low level of mutual branding. Company does not leverage mutualityto engage with customers. Moderate level of leveraging theprinciples of mutuality differentiationfor branding and awareness. Company engages with customers, butengagement is not strong. High level of leaning on the principles ofmutuality for branding and awareness. Company leverages mutuality to engagewith customers. Company aims to understand memberneeds by communicating with them andlooks to engage with them whenimplementing company changes.Financialbenefit Financial benefits are not a focus forthe company; limited or no financialbenefits offered. Financial benefits have been given inthe past, but no recent cost reliefefforts have been made. Financial benefits given, but payments(or cost relief) are inconsistent. Consistent financial benefit given (i.e.,cash, dividend or cost relief). Financial benefits improve memberengagement and align with companystrategy.Page 20EY Global Insurance Mutual Market Scan
Mutuality differentiation: market maturity assessmentMarket maturity assessment: A maturity assessment wasconducted for the six identified deepdive regions. The assessment utilizes a scale of 03, with 0 representing the leastmature (see maturity scoringcriteria), to determine the level ofmaturity within each respectivemarket. Comparability ranking: In additionto maturity scoring, each market isranked in terms of comparability tothe Canadian market, as seen withinthe market relativity scoring matrix E.g., As Canada is most similar tothe UK and Switzerland, communityorientation and value-add servicesare two areas in particular wherethe Canadian market currently lagsbehind, as indicated in the heat mapto the right.Core competenciesComparability Community orientationPolicy and product differentiationValue-add servicesMember engagementFinancial benefit* 1 indicates highest comparability on a scale of 1-5 as indicated within the market relativity scoring matrix** Markets were evaluated based on the maturity scoring criteriaPage 21EY Global Insurance Mutual Market ScanLow maturityModerate maturityHigh maturity
Endorsement from the International Cooperative and Mutual InsuranceFederation (ICMIF)A message from Shaun Tarbuck, Chief Executive Officer,International Cooperative and Mutual InsuranceFederation (ICMIF), about our research:“Mutuals, now more than ever, play a significant role in the rapid levels of innovation and growth taking place withinthe global insurance industry. It is welcoming to see EY’s Global Insurance Mutual Market Research report reflectthis. The mutual/cooperative insurance sector represents 27% of the global insurance market by premiums and wasthe fastest-growing part of the global market in the 10-year period following the onset of the global financial crisis.*Mutuals around the world are demonstrating how a purpose-led strategy enables them to differentiate themselvesand continue to drive growth and value in the post-pandemic world.I believe that the four principles of mutual differentiation as defined in this report reflect some of the ways in whichICMIF members and the rest of the mutual insurance sector set themselves apart and have a unique offering for theirmembers and the communities they serve. As a “Supporting Member” of ICMIF, our partnership with EY presents anexciting opportunity to bring added value to our members around the world with a specific mutual or cooperativefocus.”*Source: ICMIF Global Mutual Market Share 10Page 22EY Global Insurance Mutual Market Scan
We’re happy to discuss the market scan in further depthPuneet ChattreeEY Global Insurance MutualsNetwork Leader and EYCanada Insurance PensionStrategy & BusinessConsulting LeaderIsabelle SantenacEY Global InsuranceLeaderBernhard SchneiderEY Global InsuranceStrategy & d.schneider@ch.ey.comEd MajkowskiEY EMEIAInsurance LeaderPeter ManchesterEY EMEIAInsurance LeaderGrant PetersEY Asia-PacificInsurance e 23EY Global Insurance Mutual Market Scan
AppendixPage 24EY global insuranceEY iplesScanof mutuality
EY global benchmarking survey: key findingsFindings from a global survey of SMAs on various topics related to the insurance industry67% of respondents agreed that mutuals use their mutuality to differentiatethemselves from competitors.60% of respondents agreed that mutual companies see owners and customers asseparate stakeholders with different needs.Drivers for mutuals to provide value-add services (e.g., financial advice, advisory services to SMEs, etc.) to their members:Large mutualsSmall 1%70%53%60%50%47%40%26%30%20%19%10%0%to be more engaged with theirpolicyholdersResponses varied around whethermutuals moved from privatemember ownership to a newstructure because of financialconstraint over strategic choice.24%DisagreePage 2549%22%NeutralAgreeto generate additionalrevenueotherYesResponses were neutral on thetheory that mutuals will canceltheir policy with customers or notrenew if they are perceived to beunprofitable or have risk thatcannot be priced for. Yet in theAsian market, mutuals are lesslikely to cancel members if theyare perceived to be unprofitable(45% disagree, 18% neutral).87%47%57%53%43%13%to be more engaged with theirpolicyholdersNoSmall to medium-sized mutuals who havegrown beyond their original customer orproduct niche are able to maintain theirmutual identify.Disagree11%Neutral39%Agree42%EY Global Insurance Mutual Market Scanto generate additionalrevenue51% of respondents agreed(28% neutral) that mutualsselect their communityinitiatives by measuring eitherthe direct or indirect return onthe investment (ROI).otherYesNo52% of respondentsagreed that mutuals havea portfolio strategybased on assessment oflifetime value of theircustomers.
Deep-dive investigation: six nceAustralia124710n/aProfile:Selected due to:Selected due to:Selected due to:Selected due to:Selected due to: The mutual market occupies 19% of the total insurancemarket. A mixed market portfoliobetween larger and smallermutuals, which will directanalysis toward the choicesand constraints that makecertain mutuals expand andothers stay small.Mutual market share occupies 50% of the total insurancemarket within France, ranking3/11 of the countries studied. The funding structure ofmutuals in the marketprovides unique comparisons. While the regulation andfinancial health of the countryare deemed moderate, thelevel of innovation is high,with considerable investmentgrowth.Smaller mutual market sharein Australia, but higherleverage of unique purposeand values to position mutualsin the market. Policyholdersare highly engaged with thecompanies when it comes tothe decision-making process. Innovation within theAustralian market is deemedhigh, but seen as inconsistentwith a lack of focus into onearea. Mutuals leverage their uniquepurpose to positionthemselves in the market andhave moderate engagementwithin their communities andwith policyholders. The mutual sector hasinvested moderately ininnovation within itsdistribution strategy andproduct strategy. Comparable mutual marketshare with similar mutualstructure (100% owned bypolicyholder). High leverage of uniquepurpose and values to positionmutuals in the market. High community andpolicyholder engagement ofmutuals. Moderate level of marketinnovation to be considered indeep dive.Broadly, mutuals moderatelyutilize their structure toposition themselves in themarket, with the smallermutuals generally havinghigher engagement with theircommunities andpolicyholders.Comparable mutual marketshare and 2022 marketgrowth trajectories.High leverage of uniquepurpose and values to positionmutuals in the market.High community andpolicyholder engagement ofmutuals.Financial health is comparablein each market with strongCOR and loss ratios. A mixed portfolio of mutual inthe US between very largeand smaller subset, allowingfor healthy comparisons onconstraints and choices thathave made some mutualsmore successful andunsuccessful and theinfluence of size.Comparable leverage ofunique purpose and values toposition mutuals in themarket, complexity andinfluence of regulation, andinnovation. Differences around financialhealth with a stronger CORratio in Canada compared tothe US (96% vs. 104%). Difference in structure andfunding with a mix of MIHCand private mutuals in the US.Within the country, a highlevel of regulation is seen overinsurance products,underwriting and pricing forrisk.*Rank based on the EY comparability score (refer to pages 19- 20)Page 26EY Global Insurance Mutual Market Scan
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Page 1 EY Global Insurance Mutual Market Scan EY conducted an extensive scan of the global insurance sector between 2019-2020 to understand what sets mutual and cooperative insurers apart from stock carriers, and how mutuals can drive and operationalize a purpose-led strategy to differentiate and accelerate growth. 10 regions with mature mutual
