New insurance consortium builds partnerships to develop sustainable micro insurance model.
To remain relevant – and profitable – in today’s world, the insurance industry needs to start tackling the ‘big issues’ facing humankind such as poverty, resilience, development and the environment. A consortium of insurers called Blue Marble Microinsurance has come together to show that – when competitors collaborate – anything is possible, including real insurance innovation.
As Brian Duperreault, Chief Executive Officer of Hamilton Insurance Group, explained at the International Insurance Society (IIS) Conference in Rio in 2012, “For any of us to succeed, all of us must be involved. We must work together.”
Brian noted that, the delivery of insurance protection to the developing world, “Can secure increased access to capital, reduce income shocks and stabilize income levels, mitigate catastrophe losses, enhance social protection and mutualize and transfer risk. Yet only a small percentage of this population has access to insurance products.”
Just over two years later, eight insurance executives launched a consortium aimed at incubating micro insurance ventures, to help solve the global challenge of poverty.
According to Joan Lamm-Tennant, CEO of Blue Marble, “Everyone around the table understood that being able to create a successful and sustainable model for delivering insurance to the underserved wasn’t about the size of their balance sheet. It was about the mutualization of knowledge.”
The founding members understood that this would require unprecedented levels of cooperation, since many organizations had tried to create profitable micro insurance businesses in the past but few had achieved the right scale or sustainability.
“They saw an opportunity to share the innovation costs and uncover new and more efficient distribution channels,” noted Joan, adding that, by creating a transparent and viable marketplace, they could reduce the regulatory and reputational risks that often come with entering new markets.
Intense cooperation was required to overcome the issue of ownership of Intellectual Property (IP), and today Blue Marble runs almost entirely on staff seconded from their members and the IP that is generated remains the property of the marketplace.
Moving the partners from a Memorandum of Understanding (MoU) to a formal Shareholders Agreement also created challenges, but the organizations overwhelmingly agreed on the values and mission of what they were trying to achieve. This allowed them to overcome any points of debate.
KPMG International recognizes that insurance can play a clear and central role in helping the world respond to global risk, improve resilience and support economic growth. But sustainable solutions will require smart partnerships and alliances between all players in the insurance and financial services ecosystem.
The insurers participating in Blue Marble knew that, to do things differently, they would need the help of partners both inside and outside the industry. Public Private Partnerships (PPPs) would need to be formed, with developing world governments, international development groups and intergovernmental bodies and with non-traditional – even disruptive – players.
These types of partnerships are key to driving innovation and new approaches within the insurance sector since we often find that traditional insurance organizations are structured in ways that actually discourage innovation. Most need to reconsider how they integrate new partners, talent and ideas into their culture to achieve real and sustainable product and operational innovation.
While most private sector companies would be highly focused on achieving the traditional financial and market metrics – premium volume, margins, profitability, loan losses and so on – Blue Marble’s participants believe that product relevance must come first. As such, the Blue Marble leadership team measures their success against four key metrics:
While it may take time for Blue Marble Microinsurance to build a truly viable and sustainable micro insurance market, the group’s cooperative approach offers the best opportunity we have seen to date to make a real impact in the fight against poverty.
At KPMG, we have actively helped financial services clients build new relationships and partnerships with traditional and non-traditional players. We often advise clients to think through five key considerations before jumping into a new relationship:
KPMG strongly supports the goals and objectives of the Blue Marble consortium. The experience represents a strong and compelling new model for financial services organizations of all types to truly engage with the world, renew their relevance in the market and help solve some of the most intractable problems.
Sidebar image: Blue Marble Microinsurance was founded by insurance and reinsurance firms, including; American International Group, Inc., Aspen Insurance Holdings Limited, Guy Carpenter & Company, LLC & Marsh & McLennan Companies, Inc., Hamilton Insurance Group Ltd., Old Mutual plc., Transatlantic Reinsurance Company, XL Catlin, and Zurich Insurance Group.