Interview from the magazine Voice number 90 of the International Federation of Cooperatives and Mutual Insurance (ICMIF)
“Cooperative values are at the heart of Lagun Aro’s success”, says Pablo Mongelos
There can be few people in the world with an interest in the cooperative movement who have not heard of the small town of Mondragon, located twenty kilometres or so south of the Bay of Biscay in Euskadi (the Basque country), the region in the north of Spain. Mondragon, with a population of little more tan 20,000 people, has developed a worldwide fame as the heartland of an extraordinary cooperative success story. The Mondragon Cooperative Corporation (MCC) links together a range of individual cooperative businesses delivering both goods and services in a powerful cooperative federation. There are few other places in the world where the cooperative business model is so deeply embedded in both business and community life. It is absolutely no surprise, therefore, that Mondragon also includes its own cooperative insurance operation, Seguros Lagun Aro.
The Mondragon story began in 1956 and Lagun Aro first opened its doors as a general insurer a quarter of a century later in 1982. At that time, Lagun Aro’s present Director-General Pablo Mongelos was still at school. Pablo graduated with a degree in business science from university in San Sebastián in 1988, the year when Lagun Aro added a life insurance arm to its operations. He then promptly put what he had learned at university at the service of the cooperative movement, starting work initially in the export department of the domestic appliance manufacturing cooperative, Fagor Electrodomésticos.
It was hardly a surprising career move. Pablo had grown up in a home environment which was completely steeped in cooperation. His father, Javier Mongelos, was a key figure in the early years of Mondragon, with the obituary notices when he died in 2016 paying tribute to him as one of the most significant leaders of the federation. Javier was influential during the 1980’s and 1990s in helping establish the strategic direction of MCC and he served as the President of Mondragon’s General Council for three years from 1992 to 1995. Pablo’s mother, Maria Luisa, was also active in Mondragon, in her case working in ALMEN, the cooperative’s educational wing which runs – among other things – the school where Pablo himself received his secondary education. “The truth is that my life has always been enmeshed with this cooperative world,” he says. “Cooperation becomes like one’s own family,” he adds. “It’s my ecosystem”.
Pablo Mongelos made his mark in Fagor Electrodomésticos, being promoted to become Export Director and then Director-General of the cooperative. Then in 2006 he moved across to Lagun Aro, immersing himself in the insurance side of Mondragon’s operations.
Lagun Aro (the name is Basque, and means that the insurer acts a friend to its clients) is structured as a wholly owned part of Mondragon’s cooperative bank Laboral Kutxa. The present arrangement was finalised in 2011, the period before that time being a difficult one when the Spanish regulatory response to the global financial crash at one stage threatened Lagun Aro with demutualisation. But the direct tie-up with Laboral Kutxa has brought considerable business benefits for the insurer. Its products are now directly marketed to the bank’s 1.2 million customers, with Lagun Aro using Laboral’s network of 335 offices which extend out of Euskadi into Catalonia and other areas in northern and central Spain. The bancassurance link with Laboral brings 80% of Lagun Aro’s business, with the remaining 20% brought in through brokers and agents. There are benefits back to the host bank, too: Laboral is the only bank in the Spanish state which can offer its customers direct access to staff with specialist expertise in insurance.
Pablo Mongelos says that the business integration of Lagun Aro, which was implemented in 2013, has worked out very well. “The fact is that it’s been a great success and we haven’t had any real problems in having the two distribution channels,” he says. There’s room for growth, too: Lagun Aro currently has around 360,000 policyholders, so there is considerable scope to market insurance to Laboral’s other customers.
Recent years have seen a welcome growth in both premium income and profitability for Lagun Aro, with net premiums increasing by 3.6% in 2016 to EUR 116m (USD 140m). Motor insurance represents more than half of this business (EUR 65m), with property insurance also a significant element. Life business brings in a further EUR 49m, or around 30% of the total business.
Pablo is adamant, however, that this is not grounds for complacency and he is working to ensure his organisation is prepared for profound change. “We’re in the thick of a time of great change, when new technologies and new consumer ways of behaving will bring important innovations in all sectors of the economy,” he says. Insurance, he adds, will be one of the sectors transformed most profoundly.
“Now is the time when we have to be more agile,” he says. He talks of the duty to ensure that Lagun Aro is able to meet its clients’ changing needs – and indeed to anticipate them whenever possible. One task is to offer new ways for them to communicate with the insurer. Lagun Aro’s link-up with Laboral Kutxa’s online platform has worked well, and another recent innovation (again in conjunction with Laboral Kutxa) has been the development of a mobile phone app for policyholders to use. The insurer is also developing an innovative app which links it directly with car repair centres, enabling it to manage the aftermath of motor accidents more effectively for the members.
Pablo Mongelos is well aware of the transformative technological changes rapidly heading towards us, talking for example of the implications for insurers of driverless cars and of the Internet of Things. It all means, he says, that organisational ways of working have to be open to change. “I believe it’s vital to instil a culture of change. More than ever today, we must prepare ourselves for continuous change,” he says.
But he also believes that Lagun Aro, and other insurers within the ICMIF family, have a trump card to play: the values at the heart of the cooperative belief system. “These values have been very important in my life,” he says. “It’s important that in all the vortex of change that we face we don’t lose sight of our social values. These are what give us the chance to add our grain of sand in building a better world.”
Pablo Mongelos was the fourth of five children, and he himself has followed his parents’ lead in this respect, with five children of his own. His eldest daughter, Laura, is now 26 and his youngest son Ander is 18, but his family still plays a key part in his life. They have clearly been brought up to share their father’s love of the mountains. Wherever possible, he says, he finds time to head for the hills in the area of Euskadi where he lives, and a fortnight in summer is also dedicated to mountain walking, in the company of other members of his family. “I like to go broad for a fortnight with my sons and daughters, generally not following any pre-planned arrangements but making things up as we go. The one thing we do decide in advance is where we’re going. We’ve been, for example, to Norway, Scotland, England, Croatia, Ireland and Morocco,” he explains.
Pablo’s interest in life beyond Euskadi and Spain is not limited to his holidays. His cooperative has long played an active role in both ICMIF and ICMIF’s European body AMICE, and Pablo talks not only of cooperation but also of inter-cooperation, in other words, cooperation between
cooperatives. “I believe cooperative and mutual bodies have a positive point of difference over the rest of the business world. I think it’s important to affirm these, not forgetting to collaborate between ourselves. Inter-cooperation is an important component of success,” he says.