Most insurers have a structural trust problem. As discussed in Part 1 of this report, their interests are diametrically opposed to those of their policyholders – and their policyholders know it. If my insurer is a stock company, the more the insurer pays me in claims, the worse its shareholders will do. And vice versa. The earliest insurers – including the shipowners who gathered at Edward Lloyd’s coffee house in the City of London in the 1680s – avoided this problem by organizing themselves as mutuals. In 2019, a study comparing US mutuals with stock insurers found that, over the previous five years, the mutuals had indeed paid out more of their earned premiums in claims than the stock companies. They also paid five times as much money to policyholders in dividends, “reinforcing the fact that mutual policyholders are also the company’s owners.” 17 Mutualism therefore offers potentially strong foundations for insurance brands. Not all of them take advantage of it, but one company, PURE Insurance, has built an extremely strong brand with high net worth homeowners on this premise. PURE (its name is an abbreviation for Privilege Underwriters Reciprocal Exchange) was established in 2006 as a reciprocal exchange, a type of mutual with origins dating back to the 1890s. Reciprocal exchanges comprise two parts: an unincorporated association of policyholders, PURE: Welcome to the club
known as subscribers, and an Attorney in Fact, which manages the exchange for a fee. “The technical term for our model is a reciprocal exchange [but] that’s not where you want to be begin [the brand story]” says Katie Krum, chief marketing officer at PURE 18 . She prefers to invoke the spirit of Ben Franklin, a pioneer and advocate for mutual insurance in the United States. According to a PURE blog, Franklin’s notion “centered on the idea of community: that neighbors—people who share similar values with one another—could pool their risks and take care of each other.” Exploiting the brand benefits of its structure, PURE has stressed from the outset its membership model. “We like to say that we insure the most responsible families of the finest built homes,” says Krum. The idea of a club (PURE’s tagline is “Join the club”) is appealing for its connotations of exclusivity – not everyone is admitted – as well as its sense of community. The strength of PURE’s brand is reflected in a renewal rate of 94% in 2022 and a net promoter score of 59. It was also reflected in the $3.1 billion that Tokio Marine agreed in 2019 to pay to acquire the Attorney in Fact that manages the exchange – a price to earnings multiple of 33 times the company’s expected post tax profits in 2020.
17. The Mutual Factor: How Performance, Structure, and Focus Set Mutual Insurance Companies Apart, 2019, a report produced by the National Association of Mutual Insurance Companies and Aon. 18. “Marketing is a team sport with Katie Krum, SVP and CMO at PURE Insurance”. Marketing Today podcast with Alan Hart, June 2023
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