Mutuals see permanent recovery

The mutual insurance market has been on the rise, with its popularity growing since the financial crisis of 2007/8, as policyholders retreated from stock-based insurers, according to Swiss Re’s sigma report.

In its sigma report, “Mutual insurance in the 21st century: back to the future”, the company said it had observed a permanent shift in insurance buying behaviour in a favour of mutuals over those listed on the stock exchange.

According to the report, a mutual structure also allowed for incentives to better align between customers and insurers and that mutuals tended to limit premium increments and accept more claims rather than “striving solely for profit maximisation”. This often meant a better deal for the customers.

Additionally, their value was boosted thanks to their ability to compete not only on price but also on the value-added services they offered to the clients.

The report stressed that the rapid rise of the digital technology could also be “boon for the mutual model” as it seemed like a natural fit for purpose.

However, the regulators and their new-risk regulatory capital standards put some mutuals, especially smaller ones with a narrow regional or business focus, at a competitive disadvantage even though the mutuals were generally well-capitalised.

Mutuals were recently enjoying a renewed period of popularity driven by the premium growth from 24 per cent share of the overall insurance market in 2007 to 26 per cent in 2014.

The International Cooperative and Mutual Insurance Federation (ICMIF) chief executive, Shaun Tarbuck, said: “Mutuals, now more than ever, play a significant role in the rapid levels of innovation and growth taking place within the global insurance industry. It is very welcome to see the new sigma report from Swiss Re reflect this”.

The ICMIF also contributed market intelligence to the Swiss Re report.

August 3, 2016