Ten minute Q & A with Martin Shaw, exploring the challenges of Mutuality.
1. Who are the Association of Financial Mutual’s (AFM)?
We are a trade association, representing mutual insurers, friendly societies and not-for-profit healthcare providers.
2. What does the Association of Financial Mutual’s do?
We represent our members with regulators and government departments, support our members through training and the sharing of good practice, and promote the benefits of mutuality to the media, consumers and other key audiences.
3. How many members do you have?
We have 50 full members currently, who provide insurance, protection, healthcare and investment needs to around 6 million policyholders. Alongside them, we have 33 Associate members, who are not mutuals, but who work with the mutual sector.
4. How do you support your members?
We offer a wide range of services to our members. With limited resources, we aim to be very demand lead, and to constantly demonstrate we deliver excellent value for money. So the events we offer are carefully developed in conjunction with our members, and we see high levels of attendance. We engage actively with regulators to help them understand the impact of their rules and approach to our members, and are regularly rewarded with a more proportionate approach. This year we developed a new corporate governance code for our members, to ensure they apply high standards in the way their business is run, and evidence that it delivers good outcomes for customers.
5. How have you seen the Mutual market change in the last twenty years?
Twenty years ago we were in the middle of a spate of demutualisations, where mutuals opted to convert to PLCs with an expectation that this would improve their future growth prospects. That meant that by the financial crisis in 2008, the mutual sector was at risk of becoming irrelevant. Since then however, we have seen market share double, and can see a new found confidence in the sector that they can compete effectively, by using our mutual status in order to take a long-term, customer-focused view, which results in develop better products, fairer claims handling, superior levels of service and even better investment returns.
6. What are the challenges facing established Mutuals?
Whereas the insurance market is largely standardised, each of our mutual members is unique, with an individual range of products offered to a clearly identified audience through a range of channels. Many long-established mutuals have found the traditional market they support has changed or disappeared over time. The risk of competing in more mainstream markets is that, where mutuals tend to be fairly small organisations, they can’t always compete on price. The challenge therefore is to constantly evolve, as consumer preferences evolve, to remain relevant, and to identify the strengths that you can build on, to grow your market or which will appeal to similar markets.
7. How hard is it for a new Mutual to enter the market?
We often talk about the ‘capital conundrum’ for a new mutual- you can’t create capital without members, and you can’t invite members to join until you have capital available. That’s a particular challenge to a new mutual, whether they are setting out to offer insurance services, or as a building society. This explains why we haven’t seen any new traditional mutuals for over 25 years. However, more innovative models are being developed which address these kind of issues, and which mean that we’ve seen a number of new mutual challengers developed in recent years, to offer a real alternative to incumbent insurers who don’t always offer a great deal to their policyholders.
8. In your opinion, what is the future for mutuality?
Within the mutual sector, we are gaining in confidence about our prospects for the future. Whilst it’s undoubtedly true that the advent of ‘Big Data’ and the blockchain open up markets to new tech based competitors, we think the commoditised large insurers have more to worry about, as it is easy to offer better deals to customers, where you know much more about them. By contrast, mutuals tend to operate specific niches and are often seen as a vital part of the sector they support, from bus drivers to dentists, to farmers in Cornwall and livery companies in London. That unique offering, combined with the valuable benefits of membership, become very important in making a mutual more distinctive.