WHAT DOES MUTUAL MEAN?

• The mutual model is simply an alternative to the public limited company (plc) structure with which many people are familiar.
• Mutual organisations do not have shareholders but instead are owned by their members. Just like public limited companies, a mutual organisation exists to generate the best returns but instead of going to shareholders, the profits go back to members.
• The board of a mutual organisation operates purely in the interests of those members. Unlike public limited companies, which are legally obliged to put the interest of their shareholders first, the interest of customers second.

WHY DO INSURERS CHOSE TO BE MUTUAL?

• Many mutual organisations were started by a group of people who shared a common risk. For example. NFU Mutual which provide insurance for farmers across the UK or Police Mutual Assurance which provides insurance for police forces.
• This degree of commonality means that the organisation has a good understanding of the needs of its customers and so can accurately assess the risks that face them. It also means that they understand the customer which means they can provide strong customer service.
• Mutual insurers exist for those they insure and are there for members when they are in need at the time of a claim.

HOW DOES THE CUSTOMER BENEFIT FROM BEING WITH A MUTUAL INSURER?

• Profits are maximized and then returned to customers. In 2006 an average of 2.5p in every £1 of gross written premium paid to an insurer which was a plc went directly to the insurer. In a mutual organisation, that money would go directly back to benefit the members
• Some of the highest market returns for customers. Mutual insurers plan longer than three years ahead and so can take a longer term view on savings and investments. In 2007 the average return on a 25 year with-profits product was 32.9% above that of a public limited company. This return has remained significantly higher than public limited companies since 1999
• Customer Service that exceeds the industry standard In 2007, mutual insurers were among the most likely to be recommended by customers. A report showed that the customer service provided by mutual insurers exceeded the industry standard.
• An efficient business… saving customers money. The cost of operating a mutual business is significantly lower than the cost of operating a plc. This means that more customers’ money is put back into the business for their benefit.
• Embracing all levels of society with savings and investments. Mutual insurers are able to take a long term view on investments. They currently provide around 60% of Child Trust Funds in the UK even though a CTF does not provide an immediate return because each one is an investment until the child is aged 18 years old. It is the mutual model that allows them to provide this service to society.
• Acting in the interest of members. Because mutual insurers are owned by their members, they can develop product and services just because members need them and not only because they provide a high profit.
• Trusted by generations. Many mutual insurers are over 100 years old and continue to be used by generations. This means that they spend less of the customers’ money to attract new customers