Brian Duperreault
Brian Duperreault

Brian Duperreault began his career at AIG more than 30 years ago and rose through the ranks before moving on to other things. That history arguably came in handy earlier this year, when the chairman and CEO of Hamilton Insurance Group reached out to American International Group about jointly pursuing new business with the small commercial enterprise market.

“My past history with AIG gives me some knowledge of their capabilities, and I know a lot of people. It helps the dialogue and discussions,” Duperreault told Carrier Management in a telephone interview. “Everyone has to feel comfortable with the conclusion to those [talks and] we have come to a very good place where we have agreed that this is a great joint effort.”

He added, “it did help that I know the company, in order to get there.”

On April 26, Hamilton, AIG and Hamilton’s longtime technology/hedge fund partner Two Sigma Investments announced plans to jointly develop and launch a tech-focused, customer-centric insurance platform for the small commercial enterprise market.

Duperreault said that the parties in the joint initiative “probably have another 90 days to work through things before we can get started.”

Plans call for combining Two Sigma’s proprietary data science and technology platform with Hamilton’s

“None of us have a lot of time to do this …So, time is of the essence.” – Hamilton Insurance Group CEO Brian Duperreault
technology and underwriting know-how in the small to medium-size enterprise (SME) market, along with AIG’s SME capabilities and global reach. The goal: pricing and servicing using predictive analytics and an easy-to-use customer interface. Also, Two Sigma will partner with AIG and the joint venture to develop specialized asset allocation products that fit with the unique characteristics of insurance investment portfolios.

Duperreault, who will serve as chairman of the board of the joint venture, said that their initiative will very much keep agents and brokers in the mix.

“The agent and broker are involved in most of this business now, [and] the vast majority of clients in this space wish to have an intermediary involved,” Duperreault said. “I am open to whatever the customer wants, but they are telling us they want a producer. They want an intermediary involved in their buying of insurance product.”

All Eyes on the U.S. Small Commercial Insurance Sector

Analysts and the insurance industry alike view the U.S. small commercial insurance sector these days as a major business opportunity.

In March, for example, McKinsey & Co. released a new report that noted small commercial has enjoyed steady growth while other sectors have stagnated, and it also lacks a dominant player. As well, nearly 40 percent of sole proprietors in the U.S. don’t carry small commercial coverage—something that McKinsey said “raises the possibility of unexpected growth in the smaller business market.”

Small Business Main StreetRivals such as Chubb are also hoping to swoop in. Also in March, Chubb launched its North America Small Commercial Insurance Division. Chubb is the product of a nearly $30 billion merger between ACE Ltd. and the old Chubb, and both separately targeted the small commercial insurance market in the past. While both targeted specialty niches, the new Chubb division goes further, offering broad coverage to small business clients across both standard and specialty lines.

The Hamilton/AIG/Two Sigma initiative also comes in the wake of a Novarica report last November that suggested the U.S. small commercial insurance market would likely embrace direct online sales within the next five years, though it is slow to do so right now.

Getting There More Quickly by Joining Forces

Duperreault said seeking out AIG as a partner to pursue the small commercial enterprise market makes sense, because it will help Hamilton grow in the small commercial sector more quickly.

“The advantage is we bring in a partner in AIG that has extensive product capabilities, more than we have, and has a lot of data,” Duperreault said. “That combination of data and capabilities around science, data and product capabilities is something that then allows us to accelerate our own efforts in the space. We believe we can do a better job of creating a product that a customer wants and needs through this.”

Duperreault said that Hamilton would have eventually entered the small commercial market, but “this would have taken a considerable amount of time.” To be competitive requires quick action, he added.

“None of us have a lot of time to do this right, and so time is of the essence,” he said. “We thought the combination of [AIG’s] expertise and [Hamilton’s] expertise and Two Sigma’s expertise would create a better product quicker.”

What’s more, the combination of the three companies will bring something innovative to the small commercial enterprise insurance space, Duperreault added.

“We believe we have already developed some technology that we think is innovative at Hamilton that is available to the joint venture,” Duperreault said.

Another new element is that a company as large as AIG is involved in targeting the market space.

“With AIG, you have a company that has extensive product offerings and has been providing coverages to a wide variety of customers already, so yes, it is a space that everyone wants to get involved with, and why not? It is very large—north of $75 billion in market size—and it isn’t concentrated,” Duperreault said.

However, Duperreault noted that the new venture fits in because small commercial insurance has “a relatively high cost of doing business,” and “cost levels for delivery of this product are excessively high.”

“Everyone is looking at how we can do a better job, how we can do it quicker, how we can do it cheaper,” Duperreault said. “This [joint venture] has a chance of delivering better products, and the unique capabilities we all put on the table give us a chance.”

(Brian Duperreault photo above provided by Hamilton; Photo appearing on Carrier Management newsletter of Brian Duperreault speaking at the IIS Global Insurance Forum last year was provided by the International Insurance Society.)

Topics Mergers & Acquisitions USA Market AIG Chubb