Using its recently established underwriting base in
Ireland, US mutual insurer Cuna Mutual Group is on a drive to
significantly boost its European market share. Paul Walsh, CEO of
the insurer’s European operations, shared with LII the
strategy being followed, particularly in the UK’s building society
sector.
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Driving growth by offering
consumers simple, understandable and affordable products is the
over-riding objective of Cuna Mutual Group Europe (CMGE). And the
strategy is working, according to Paul Walsh who, three years ago,
was appointed CEO with a mandate to follow an aggressive expansion
strategy. The life, health and general insurer is focused on
distribution through mutual financial institutions.
Since his appointment, CMGE has
made significant headway and is set to achieve a 50% increase in
new business in 2010, Walsh said. From the outset he focused CMGE
on making major inroads into the UK’s mutual financial services
sector with a specific focus on building societies.
Walsh explained that CMGE, which
does not market any of its products directly, signs exclusive
marketing agreements with building societies and other co-operative
financial institutions to which it supplies products from its
portfolio of life and general insurance products.
CMGE is a unit of US-based Cuna
Mutual Group (CMG), which has had a presence in Europe since 1963
and the UK since 1976. With assets of $14.5bn it is the market
leader in the supply of insurance products to European mutuals,
according to CMG. CMG’s revenue in 2009 totalled $2.8bn.
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By GlobalDataHowever, Walsh said CMG’s approach
to Europe was “benign” until the establishment of its European
headquarters in Dublin, Ireland in 2008 to underwrite life and
general insurance products for distribution throughout Europe.
CMGE gained its first UK building
society alliance partner in 2008 and by the end of 2009 had added a
further six.
“We now have partnerships with 12
building societies and will increase that to 15 by the end of
2010,” said Walsh.
According to the Building Societies
Association, the UK’s 50 building societies have total assets of
£335bn ($520bn).
High-volume
model
Walsh explained that large UK life
insurers tend to focus on “large ticket” products for the high-end
of the market while CMGE has a high-volume, low-value model.
“In the UK, there are 32m people
with building society and co-operative relationships. The market is
there and needs to be served effectively,” said Walsh.
He added that building societies
are looking for bespoke products that fit with their market and,
more importantly, are seeking insurance partners that add real
value to their members and their business.
The two products so far launched by
CMGE specifically for the building society market are a mortgage
payment protection product, Mortgage Cover+, and a life insurance
product, Family Life+.
In keeping with CMGE’s business
model, sums insured and premiums are low. With Family Life+, for
example, monthly premiums start from £2.50 per person insured while
the four benefit levels offered range from £2,000 to £6,000. There
are no medical questions and customers under 70 years old are
guaranteed acceptance. The qualification period for cover is six
months in comparison with the current industry standard of two
years.
Family Life+ is specifically aimed
at meeting funeral costs – which in the UK average about £2,500 –
and to this end offers payout for valid claims within 48 hours
compared with traditional life policies that Walsh said take on
average three to five months to be settled.
“CMGE is achieving a 98% rate of
claims resolution within 48 hours,” said Walsh.
The highest rate of uptake of
Family Life+ has been by women aged between 46 and 50, said Walsh,
who added: “The number of women buying the product surprised even
us.”
He explained that women buying the
product are generally looking to secure cover for themselves and
two additional family members, in most cases their parents or
spouse, and on average 2.2 people are covered per policy.
Mortgage Cover + is also proving
highly popular, said Walsh, and is achieving double the average
take-up in policies for building societies than products of other
mortgage protection insurance providers that they previously
sold.
The product has also been adopted
by other mutual institutions such as Scottish credit union
Scotwest, with which CMGE has had ties for 16 years.
Guiding
principles
Walsh said CMGE’s approach to the
UK market is based on three guiding principles, the first of which
is ensuring that customers are comfortable with the product they
are being offered. He explained that customers are required to
answer only five questions to ascertain whether a product meets
their needs.
“The product is either right for
them or it is not. If it is not we won’t sell it to them,” said
Walsh. “
The second principle adhered to is
to provide customers with products that are clear and simple to
understand and do exactly what they say they do. There are no added
“fancy bits,” said Walsh.
Finally, said Walsh, it is vital
that building society staff are confident that they are selling a
product that is right for the customer.
CMGE certainly seems to have got
the recipe correct, with Walsh noting that surveys indicate a 100%
satisfaction level from its building society partners and their
customers.
Walsh conceded that “our loss
ratios are quite high and would be unacceptable for a stock
company. But for a mutual insurer in a position to take a long-term
view he stressed that they are acceptable.
“We are not in this for the
short-haul. We want building societies to win in a big way,” said
Walsh.
CMGE has the backing of what Walsh
termed “some of the best underwriters in the business and one of
the best actuarial teams in Europe.” CMGE also comes with
considerable financial muscle provided by parent CMG, which has a
rating of “A” (Excellent) from AM Best, the rating agency’s
third-highest rating.
Established in 1935, CMG reported
total assets of $14.44bn in 2009 and a policyholder surplus of
$1.8bn.
Total revenue in 2009 was $2.76bn
of which life and health insurance contributed $1.21bn and general
insurance $853m.
CMG has proved that it is adept at
expanding internationally, serving mutual financial services
institutions in 30 countries, including Australia, where it has
been established since 1969 and today provides insurance for more
than 95% of Australian credit unions.
With the mutual sector facing
similar regulatory and capital pressures to shareholder financial
institutions a move towards the increased formation of alliances
with major mutual product suppliers such as CMG appear likely.
Walsh believes that in Europe Solvency II will be just such a
driver.
Praising Solvency II for the
protection it will afford policyholders Walsh stressed: “Being well
run and well capitalised, Cuna will benefit from Solvency II.”
CMGE, he added, has in-house actuarial and compliance teams more
than capable of coping with the demands of Solvency II.
However, he continued, many insurers are likely to find the cost
of governance beyond their means and predicted that Solvency II
will spark a “shake up” in the market. To survive he believes that
many will opt for white label products supplied by strong
organisations such as CMGE and will become distribution “shop
windows.”
See also: CV snapshot,
Paul Walsh, Cuna Mutual
