LV’s alarm call for mutuals
BrITAIN’s mutual building societies, insurance companies and co-operatives were once a potent force. A product of the Victorian era’s reforming zeal, they were an engine for social mobility on a large scale – an early and effective form of Levelling Up, to use today’s parlance.
Through self-help, they enabled ordinary people to buy their own homes and begin the slow ascent from grinding poverty to the middle class.
Mutual insurance companies provided a financial safety net for families in an era where workplace mortality was high and the death of a breadwinner often plunged a widow and children into destitution.
I was struck, when reading a book published in 1907 by ironmaster’s wife Lady Florence Bell about Middlesbrough’s teeming working class community at the turn of the last century, by her moving account of the store set on funerals. LV, once the Liverpool Victoria, started out by helping people to give loved ones a dignified departure, instead of a pauper’s grave.
Perhaps Mark Hartigan and Alan Cook, the chief executive and chairman who are trying to sell the country’s second-largest mutual insurance company to private equity, think this is just a sentimental meander down memory lane. Not quite.
It matters now more than ever that ordinary people have access to finance on fair terms, a voice in what happens to their own money and access to information to make choices. These were the values at the core of the mutual movement and they are as important now as in the 19th century.
The personal finance landscape is changing rapidly. Tech can deliver us more control and involvement with our money – and therefore be a great enabler of small saver democracy. There is potential for the rebirth of mutuality, which is much needed.
I am not starry-eyed about mutuals nor am I blind to the many shortcomings.
Mutuals are seen in the City as the slow lane, so the pay at the top, though lavish, is not as extravagant as elsewhere. As a consequence, the sector has attracted more than a share of charlatans and duffers.
THAT roll of dishonour includes the crew who led equitable Life to the brink of ruin and the Crystal Methodist Paul Flowers, former chairman of Co-op Bank. Big beasts demutualised and floated on the stock market in a carpet-bagging fever. The large mutual insurers were sold off or floated. I actually don’t blame the Us private equity house Bain Capital for spotting an opportunity to profit from the embers of the mutual movement – that would be like castigating a scorpion for its sting.
Cook and Hartigan are primarily at fault for their inadequate stewardship. Members were entitled to expect more than this deal. reality among mutuals has often fallen far short of the noble principles. But that means the principles need defending and reinventing, not abandoning.
Private equity and the managers so keen to sell to them should expect scrutiny. regulators must do better in safeguarding consumers. It seems almost every major incident falls outside their perimeter.
The bosses of our last big operators, Nationwide and royal London insurance, must champion the virtues of modern mutuality. And small savers need to take an active interest and make ourselves heard.
However the LV vote goes, I hope it is a wake-up call.