Rewriting the insurance model

Nemwil's revolutionary approach to risk management made insurance coverage possible in the Caribbean's difficult hurricane zone.

As the first indigenous insurer to receive an AM Best Global Rating, N.E.M. West Indies Limited's experience at managing growth and its corporate strategy for breaking into new markets, may prompt the financial services sector to re-think they way it does business in the region.
The company's remarkable successes at achieving strong growth performance and rapid expansion throughout the Caribbean may have come as a surprise to many, but the strategy was based on the sound investment and insurance principles of diversifying risk.
This need to diversify the company's risk, was the driving force behind one of the most impressive corporate expansion strategies ever seen in the region's insurance sector.
"We realised that with an oncoming recession in the early 1990's, it was an unpopular decision to hold on to our policy of fair pricing, excellent service and only underwriting quality business," says Managing Director, Gerrard Lee-Inniss.
Innovation and expansion are often not the first choice for firms facing a dwindling market and increasing competition, less so for insurers or investment managers whose first impulse is to be conservative and protect their funds in the face of mounting risk.
"Initially, our decision did not hold well with many of our clients, and we lost a lot of business in those years, but we knew that the only way to protect them in the long run was to have the reserves to cover their loss and to spread the risk as widely as possible." 
"We realised that although the industry was highly competitive in our home market of Trinidad and Tobago, where prices were soft and there was excess capital and capacity, other clients in the wider Caribbean were not being adequately served. And, there were tremendous opportunities with the proper risk management policy to expand our market share and client base in these territories.
Inniss said that despite the business opportunity, the company was not going to approach these markets as a Ôfree for all' and they decided to properly do their homework and research the new markets before moving in.
"You must remember that together with the anticipated revenue growth, we would also be accepting a tremendous amount of risk as well.
"In fact, the high risk factors are precisely what discouraged many other insurers from entering these markets," he said.
"To make it even more challenging, we realised that the high risk estimates for these territories were accurate," says Inniss. "However, we were still able to capture a large portion of the market because we went into these islands with a well-formulated plan of action and a strategy that stressed protection for both ourselves and our clients.

Strategy

"First of all, we made a strategic decision to adhere to the basic policies of quality and fairness that have made us successful in the past. However, we needed to take it a step further by helping customers to reduce their risk as well. For example, in our general insurance portfolio, we ensured that all the properties met the minimum standards to withstand a hurricane.
"You must realise that, on the whole, people do not want to get compensation money - they want to keep their houses or businesses. So, we made sure that they protected themselves first, and then we covered them for when things got worse than expected.
"We tried to resolve issues long before they grew into bigger problems and in the process many of our properties were able to weather the storms, floods and other natural disasters, without significant damage.
"This partnership with our clients is the basis of our growth and continued financial strength. It also provides customers with the assurance that we would be there if a loss occurred.
"Because of this and the high risk factor - particularly for hurricanes in the smaller islands, we were often the only company still writing new business in many of these territories.
"As each territory is small, we needed to spread the risk over a wider market. This provided the opportunity for the business successes in one territory to cover losses which may occur in another," said Inniss.
He added that the over-riding need to spread the risk around the region to secure the company's portfolio and to provide adequate protection for its customers were the basis of the company's overwhelming impulse to expand even more.
"Although we were making good profits, our business was too concentrated in Trinidad and Tobago in 1990. We did not feel that we had the type of diversity to protect our policyholders from a catastrophe.
"In addition, the military coup in Trinidad was a wake up call for us and we immediately went to work on expanding our business in the rest of the Caribbean by looking for new opportunities and spreading our risk away from the concentrated portfolio in Trinidad.
"Almost immediately we were reaping the rewards of the effort. Following the disaster of Hurricane Hugo, there were forecasts of increased hurricane activity for the region in the 1990s and many insurers pulled out of the smaller islands leaving a tremendous void.
"We saw the opportunities and took up many of the clients who were abandoned when they really needed the coverage.
"This did not mean we provided coverage without a plan. We ensured that clients did what was necessary to reduce their exposure and we offered fair prices. So, coverage was affordable, but not so low that we may run out of cash to cover them if a loss occurred.

Loyal Customer Base

The strategy of sticking with their clients paid off and Nemwil has captured one of the most loyal customer bases for insurance services in the eastern Caribbean.
The company continues to grow and maintains a strong market position in the territories they operate. Growth has also come from acquisitions spread throughout the region. Nemwil's management continues to strengthen the company's financial position as they have refused to cut pricing in what has been a soft market in Trinidad and Tobago.
"Despite the challenges we faced, we have never shied away from paying claims promptly. There is no better promotion for our company than being recognised by customers for living up to all your promises," he added.
"With this in mind, it was an easy decision for us to honour claims in Montserrat, when homes and property were lost or damaged during the volcanic eruption. This policy has also been followed in the aftermath of the three major hurricanes that ravaged the region over the decade.
"In Montserrat, we could have taken the option to refuse payment as other insurers did, but the impact on the reputation that we had been working hard to build of settling claims fairly and promptly would have been ruined. It would have also brought in an element of uncertainty and would have unduly stressed the relationships we had developed with our clients in the region. And to us, our reputation and the relationship we have with our clients are worth more than money.
"The only real product insurers have to sell is the promise that they would be there for their clients when they incur a loss. So, we were obligated to help them get back on their feet," added Inniss.
Since 1990, Nemwil's agency network has grown to be one of the most extensive in the wider Caribbean and its bottom line and asset base is also one of the strongest. Despite intense competition in its major markets and the increased frequency of catastrophes over the years, the company continues to post good asset growth and profits.
In 2000, Nemwil retained its "A" Excellent Best Rating for the seventh consecutive year and expanded its market into the UK by acquiring a Lloyd's Corporate Member in 1999. The company also acquired Generali's portfolio in the Bahamas and established a new Agency in the British Virgin Islands.
With a seventy-year history in the Caribbean's insurance and financial services industry, Nemwil underwrites all classes of business - these include conventional automobile coverage to inventory loss due to refrigeration breakdown. In addition, the company offers life insurance and group health coverage.
Recently, the company added coverage for large-scale projects in the energy and petrochemical sector as part of a consortium of regional indigenous insurers.
As a privately held company, Nemwil has focused on the promotion and growth of their business throughout the Caribbean, as well to extra-regional markets including South America, Miami and London.
In 1991, the company was one of the first in the region to start writing terrorism and sabotage business, which was initially offered in Trinidad and Tobago. It continues to develop new products on an ongoing basis for personal and commercial lines of business.
With a strong asset base and a positive brand image, the company is taking its developmental programme to the next level. A review of its client base indicates that although it is still quite secure, the long successful track record has resulted in a client base that is older than their competitors' - particularly in its home market.
To deal with this challenge, Nemwil may face the future in the typical way that has made it a leader - by embarking on a new revolution.
So far, the strategy includes a whole new product line and a marketing strategy that specifically targets younger clients.
New products, such as their Young Experienced Driver and Legacy Products pass insurance benefits from one generation to another, while products such as "The Provider," can meet the bills and living expenses of unemployed persons for up to a year until they acquire another job.
"The younger generation does not buy insurance the same way their parents did," says Inniss. "They now have a lot more options, including buying insurance on-line and a wider range of choices from foreign insurers as well.
"We cannot ignore this, particularly since technology continues to give Nemwil a significant edge in its customer service and decision making," he adds. "We will soon launch our new website, which will be more interactive and provide quotations on-line, as well as process claims. We were one of the first firms to computerise our claims and information systems and provide real-time updates on our accounts. In many instances, our clients can receive their cheque the same day their claim is received.
Our London operation is also based on cutting edge technology and most of the work is done through telemarketers. Clients call a toll free number and can receive an on-the-spot quotation, which can be accepted with payment settled immediately through their credit card. The insurance certificate is then mailed directly to the customer.
The system is very inexpensive, efficient and competitively priced. The added convenience is also very appealing for younger clients who are comfortable with technology and do not have the time to slow down to deal with issues such as insurance and payments that can be easily taken care of with a simple phone call.
With their new alliance with Guardian Holdings, Nemwil is looking forward to expanding its product line to include services that targets the younger generation. In addition, there are many other financial services products that will be developed to take advantage of banking and investment opportunities that are currently being provided by Guardian Holdings and its subsidiaries.
As the firm basks in its successes, it prepares for its next big challenge of targeting a younger client base, in a market that is even more competitive, responsive and dynamic than ever before.
They also recognise that much of their good performance in the past arose out of their ability to identify opportunities that could have easily slipped through the fingers of any other insurer facing softening market prices, an unprecedented series of natural disasters and a business model that conserves cash and contracts customer services when facing a tight and highly competitive market.