Milliman has come a long way since it was founded in 1947 in Seattle. Among the world’s largest providers of actuarial, risk management and related technology and data solutions, Milliman has offices in principal cities worldwide and more than 3,000 staff. Milliman’s mission is to “help our clients protect the health and financial well-being of people everywhere”.
Network Exchange sat down with Milliman’s Joanne Buckle, principal and consulting actuary in the London office, and Michael J. McCord, principal and managing director of the MicroInsurance Centre at Milliman, to catch up.
Buckle has been a health actuary for more than 20 years, working across a broad spectrum of clients worldwide and on several transformational healthcare projects dealing with whole country systems. McCord was a founding member and former chair of the MiN and has over 25 years of experience working in the microinsurance field providing consulting services.
How does Milliman operate?
Joanne: We work across four disciplines: health, life, employee benefits and property & casualty. We’re mainly a consultancy, but we also have a number of actuarial and technological products. Milliman has a broad business model. We started as actuaries, but there are a lot of people here from other backgrounds - on the health side we have physicians, nurses, pharmacists, health economists, health technologists, medical statisticians - the whole range of complementary business skills.
Why does Milliman believe inclusive insurance is important?
Joanne: Our mission statement is to help our clients protect the health and financial well-being of people everywhere. We have both a push and pull role - following clients reactively as they became interested in inclusive insurance (including microinsurance) in various underserved regions, but also encouraging them to seize new opportunities where we think there is a big underserved population. In the last few years, we have seen a lot of interest from our clients wanting to enter markets, including low-income markets, that are traditionally harder to penetrate in terms of spreading the risk mitigation message and widening inclusive insurance, and microinsurance specifically.
Milliman works in the microinsurance space through its MicroInsurance Centre at Milliman (MIC@M), a practice dedicated to microinsurance consulting, as well as through several of its global offices. We also help with capacity building in the actuarial field. For example, in collaboration with the German Development Agency, we held a series of actuarial seminars in Accra, Ghana, last year, and this year with the Nigerian Actuarial Society in Nigeria. We also have online classrooms and send senior staff to help students prepare for actuarial exams. All of these activities demonstrate Milliman’s commitment to corporate social responsibility through the work we do with clients.
The MicroInsurance Centre went through a big change when you joined Milliman two years ago. How’s that working out?
Michael: The move to joining Milliman has been fantastic. We have great support and many in Milliman clearly see the values we both bring. We still maintain our core principles and mission of getting SUAVE (simple, understood, accessible, valuable, efficient) microinsurance products into the hands of three billion low-income people, but we additionally draw from Milliman’s range and diversity of expertise to offer clients that are trying to start or enhance their insurance offerings in the low-income market segments a broader package of services.
With clients, especially in Asia, Africa and Latin America, Milliman can now offer solutions that cover their whole market, with all of Milliman’s services across the economic continuum, including both the traditional and low-income markets. It’s been a fantastic arrangement, and it’s working great for everybody – Milliman, the MIC@M and especially clients who get great value in the broader package of technical assistance.
How has the MIC@M evolved?
Michael: When I started in the late 1990s, it was just me doing some studies and talking to insurance CEOs in developing markets to get them to recognize the massive opportunity of microinsurance. I would tell them that 80% of their market wasn’t being satisfied and this was a great opportunity for them. Until then they hadn’t seen it as a viable market or a way to make money. Many at that time said, “Low-income people don’t have any money for premiums, and they don’t have anything to insure” - which I found a bit offensive.
Today, the MIC@M has nine professionals as part of our practice, located in our Wisconsin office as well as in Singapore and Australia, and we are growing. Plus, since 2017 we have been an important component of one of the largest and most respected actuarial consulting firms in the world.
We work with regulated insurers and a variety of distribution channels to build markets, create and improve products, and generally help insurers through the paradigm shift required for successful microinsurance implementation. We’ve done a great deal of research - for example, the Microinsurance Learning and Knowledge project and large-scale demand research in Ethiopia - and we’ve conducted supply-side landscape studies since 2005. The research provides information to the wider markets and helps inform products and institutional development.
We’re a consulting practice with a focus on helping low-income people secure their lives. We continue to focus on the low-income market, making sure they don’t get ignored in the push to tech and mass insurance.
What is the business case for microinsurance?
Michael: Every year that goes by, we see more of a business case, although it’s not for everyone and there are many different factors which can make it profitable or sustainable. Different products offer different levels of profitability. Scale is critical, of course - you are unlikely to be sustainable at 2,000 or 5,000 clients. If you can leverage your overheads across 50,000 or 100,000 clients, then you can have better pricing and better products.
Efficiencies are another key principle - trying to implement microinsurance with the same processes as traditional insurance simply doesn’t work. It’s too expensive, so you have to find ways to bring the costs down. At the same time, sustainability requires providing good value to clients. We call this the “magical balance” - clients get value and insurers and distribution channels at least make a sustainable profit.
What is your view of the current inclusive insurance market?
Joanne: From an actuarial perspective, one of the key challenges is data and quality of data. There still seems to be a lack of robust data on which to base pricing for products, and that has implications for how much margin for uncertainty you have to build in when designing products. I don’t see a huge focus on data collection and analysis, particularly when products are launched - although to be honest that is no different from most developed insurance markets. That has implications for people being comfortable signing off on products at low prices. It limits opportunities because if there is a huge amount of uncertainty, it’s difficult to price things competitively.
If you look at Dubai and Abu Dhabi, for example, they have really good data because there is a regulatory imperative to collect it. They have a standardised data structure so everyone has to code their health data in a standardised way, and they have a standardised reimbursement model, which also encourages standardised coding. That means there is a common data structure across the industry, which makes data sharing and aggregation much more feasible. In my experience, it helps to have a regulator who says, “In order to manage your business, you need to collect this set of data in a standardised way and report on it on a regular basis.”
In the areas of the world that I have worked in, if the regulator has led this conversation, it has been a much smoother journey.
Are insurance companies trying hard enough to develop insurance markets?
Michael: There are some multinational insurance companies that are sincerely interested in low-income markets. Insurers are moving towards mass insurance – particularly in Latin America, for example-- and this trend will certainly spread through the other regions. That’s not necessarily a bad thing - everyone should have insurance - but we need to make sure lower income people have products that actually respond to their needs.
Some investors are trying to change the activities of insurance companies, leveraging their investment to try and push these companies from inside. It’s been slow going, but I am confident we will have some successes.
Can insurtech create efficiencies?
Michael: Technology is a crucial element of reducing admin costs. It doesn’t always make things easier - we see lots of examples where tech has simply made things more complicated - but I think there is tremendous potential for microinsurance. However, I’m concerned that as we gather and use big data and advanced technology, that we will actually leave behind those without access to such technology.
For example, we see all these financial apps which are very cool and do great things, but many only work on smartphones. In some countries, low-income people have smartphones, but in most countries that’s not the case.
Is the label “microinsurance” hindering market development?
Michael: I think we all made a bit of a mistake when we started calling it microinsurance. This term linked it too closely to microfinance, and yet it is very different from microcredit or micro savings. It has different mechanisms, different risks and even a different market, and a different trajectory. Now some people equate microinsurance with insurance that you can’t make any money on, which is ironic given we have more and more evidence that these products can be sustainable, and in some cases make very significant profits. There’s good evidence that microinsurance can achieve the “magical balance”, but there are still a lot of products providing little value for low-income people.
How does the MiN add value to your work?
Joanne: Networking and sharing of best practices is really important for me. When I first joined the MiN, I was very impressed with some of the case studies that were being presented and the ability to network with people at a similar level.
Data collection is one area where Milliman and the MiN can really cooperate. The landscape studies (of which the MIC@M conducted most of them), analysing and getting data out into the market, and giving people an idea of the metrics in different markets are all hugely important. They give people confidence that they can access quality information in areas of the world that they might be considering investing in.
What should the MiN focus on over the next five years?
Michael: I’d like to see a much stronger regional approach. The Network needs to be where the market is, and fundamentally what the MiN should be about is working with companies and countries in the global south to enhance risk management opportunities for low-income people. That’s where the network belongs - that’s where it’s going to have the most impact.