Global swing towards mutual insurers

More consumers around the world are putting their faith in mutual insurers than in their listed counterparts, an international conference on mutual insurers heard recently.

A report prepared for the International Co-operative and Mutual Insurance Federation (ICMIF) conference discloses that these insurers’ premium income has grown by 25.4 percent since 2007, whereas the total insurance market grew by only 12 percent over the same period.

More than 300 mutual insurance leaders attended the biennial ICMIF conference in Cape Town last week.

Co-operatives and mutuals are owned by their members and distribute their profits to their members, rather than to shareholders as do listed insurers.

The share of the global insurance market held by co-operatives and mutuals has grown between 2007 and 2011, from 23.7 percent to 26.5 percent, the ICMIF said in a statement released at the conference.

South Africa’s largest mutual insurer is the Professional Provident Society (PPS). It offers life assurance, short-term insurance, retirement annuities, and savings and investments to some 270 000 professionals who have at least a four-year degree.

Last year, PPS allocated R3 billion in company profits to its members’ profitshare accounts, which will become available to them on retirement.

PPS is one of the few local assurers that retained – and, on some types of cover, grew – its share of the market of more affluent policyholders in 2012, PPS’s chief executive officer, Mike Jackson, says.

Jackson was appointed to the board of the ICMIF.

Shaun Tarbuck, chief executive of the ICMIF, says the growth in mutuals since the global financial crisis in 2008 is the result of consumers having a higher level of trust in, and more satisfaction in their dealings with, mutuals.

Consumers are reacting to the culture of greed that they believe pervades insurance companies that have shareholders, and since the recession they have sought out the better value and lower costs traditionally associated with mutuals, Tarbuck says.

Jackson says that, because mutuals do not have to satisfy shareholders, they are focused on their members and ensure that they address their needs and not the return requirements of shareholders.

The result of mutuals treating their customers well is that customers remain loyal, he says.

Jackson says that he knows of only two other mutuals in South Africa. Organisations such as trade unions and churches should consider initiating mutual insurers for the benefit of their members, he says.

One of the key messages at the ICMIF conference was that an earlier wave of demutualisation was driven largely by management greed, he says.

Jennifer Preiss, Deputy Ombudsman for Long-term Insurance, told the ICMIF conference that, at a recent conference of the International Network of Financial Services Ombuds Schemes held in Taiwan, ombudsmen from around the world agreed that consumers are becoming more demanding.

Consumers are increasingly using social media to lodge complaints about financial services companies, and insurers are often jumping to resolve complaints publicised in this way, she says.

The deputy ombudsman says it is becoming a worldwide trend for ombudsmen to publish the names of offending insurers and the number of complaints upheld against them.

In South Africa, both the life assurance and the short-term insurance ombudsmen started to publish the number of complaints per company this year.