Latest Poll – Bring Back the Mutuals?

In a seemingly ever-changing life insurance landscape, our latest poll asks you to consider the merits of the mutual life insurance company model.

The Australian market was once dominated by mutual insurers, at a time when AMP, National Mutual and Colonial Mutual Life, amongst others, strode the Australian life insurance stage.

One by one, however, the mutual insurance firms – which served their insured members – were replaced by the publicly-owned entities – which serve their policyholders, but are owned by share holders.

One of the benefits associated with publicly-owned life insurance companies is that they tend to have a more significant financial base than mutual insurers, which means they have more resources to invest in policyholder protection and client services.

On the other side of the coin, one of several key potential benefits applying to mutual insurance firms is that they’re owned by the policyholders, and their primary focus is directed towards providing value to policyholder members rather than generating profits for shareholders.

The Australian market currently has a single mutual insurance offer – PPS Mutual – active in the retail life insurance space. And while there may be logical arguments that support both mutual and public ownership of life insurance businesses, advisers who currently count PPS Mutual among their providers for client solutions have also identified other benefits the mutual insurance model can deliver.

For example, Melbourne-based risk specialist adviser, Bradley Gecelter (Priority Life), told Riskinfo that client retention is more robust for his clients insured under a mutual model. He says this is due to a combination of reasons, including the value linked to profit share potential and the fact that premium increases in recent years in particular have been managed in a different way, allowing clients more flexibility in their consideration of how to manage the additional premiums over time.

Another risk specialist adviser, Phil Thompson (Skye Wealth), has identified what he says can often be a better ‘fit’ between his eligible clients and the product and service offer provided by PPS Mutual, while also bearing in mind the potential benefit down the track in the form of profit share arrangements.

There are additional arguments that can be advanced for both the mutual and publicly-owned life insurance business models, and we’ll explore this in more detail next week. In the meantime, though, it’s over to you, as we welcome your vote and your thoughts on this question…