Mutuals must make full use of analytics

Mutual insurers face increasing pricing pressure in the current market environment and must differentiate themselves and ensure they make full use of analytics to remain competitive, according to Willis.

David Thomas, the chief executive of Market Services & Solutions at broker Willis, said that by their very nature mutuals face specific pressures that they must manage carefully in their current environment.

“Mutuals generally take a long-term view of their customers, so tend to create a stable product over a long period of time. As a result there are periods when mutuals’ pricing is considerably cheaper than the commercial market, and other periods when they are more expensive,” he said in a blog.

“At a time like this mutuals are faced with enormous pricing pressure. In this environment they must emphasise how they differ from the competition in terms of understanding the dynamics of a homogeneous book of business, and how their risk management and claims services are bespoke to the needs of their clients. If they do these things well, I think that they can weather the current environment.”

John Haydon, executive vice-president at Willis Re, explained why analytics are absolutely critical to mutuals, which, by their very nature, tend to be relatively undiversified.

“Mutuals usually have a particular geographic territory or membership base that means that they are narrow in focus when compared with a typical commercial lines carrier. As a result, they tend to suffer when being considered from a Solvency II or rating agency standpoint. This means they must use all of the tools at their disposal, such as analytics, to minimise that disadvantage,” he said.