Global swing to­wards mu­tual in­sur­ers

Weekend Argus (Saturday Edition) - - PERSONALFINANCE - LAURA DU PREEZ

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.

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