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June 2010

Mutuals excel at service and treating customers fairly

Mutual insurers and friendly societies according to their customers, deliver better service, really care about them and treat them more fairly than non-mutual insurers, according to research amongst over 20,000 customers of life insurance companies, of whom around a third were customers of a mutual.

The customer research was conducted through the Association of British Insurers (ABI’s) Customer Impact survey, which explores in depth the relationship a customer has with his or her life office. The 10 members of the Association of Financial Mutuals that took part in the survey and provided their results represent over a quarter of all the results1.

The overall summary of the survey is the Customer Impact Index. The score for the industry as a whole fell from 52% in 2008 to 51% in 2009. For mutual insurers however the score was 58%, up slightly from 2008, and significantly higher than the industry as a whole.

At this stage ABI has asked we do not publish more detailed information.

The flight to quality

The results overall show that during a harsh economic and business climate, mutuals have continued to work hard to improve customer experiences. As a result, where the market as a whole witnessed falling business volumes in 2009, results posted so far by mutuals were largely positive. A similarly good result in 2008 was ascribed to a ‘flight to quality’- with mutuals seen as less risky during times of adversity.

However as that trend persisted whilst markets and customer sentiment recovered in 2009, it is surely a sign that customers increasingly recognise the value of mutuality- by placing their hard-earned cash with organisations that are in business to serve their best interests without the possible conflict of securing the interests of shareholders. Perhaps it is also reaffirmation of the caring, sharing and more selective society that the new Government is seeking to reflect in policy development.

The research not only clearly demonstrates the superior performance of mutuals, it also reveals that a positive customer experience with mutuals colours a client’s opinion of the entire industry. Customers of mutuals have a higher opinion of the industry as a whole: 52% of mutual customers agreed or strongly agreed that the insurance industry has an excellent reputation, compared with 48% of the customers of non-mutuals.

The bigger picture

The research is part of a wider initiative by ABI to improve customers’ experiences of the life insurance industry. This is a significant commitment by the industry and we fully support Customer Impact and the considerable improvement in standards it is generating3. This is most clearly evidenced by the way customer scores have been maintained over the last two years, during a very tough investment climate and a general reduction in consumer sentiment toward the financial services sector.

The survey comes hot on the heels of research from the Building Societies Association, which in a similar vein demonstrated that customer service in building societies is significantly better than that provided by banks.

And the mutual advantage does not end there- recent research by AFM showed that investment payouts from mutuals tend to be significantly better than their proprietary counterparts. According to data from Money Management’s April 2010 review of with-profits, the average with profits policyholder in a mutual insurer was 24% better off over 25 years than the average customer of a shareholder-owned company. Returns were also 15% higher than the average unit trust.

In summary, mutual organisations continue to deliver tangible evidence of the value of mutuality. Customers trust their mutual provider more, and enjoy higher standards of service and better performance. We can only hope that policymakers and regulators recognise that mutuals offer a real and beneficial alternative to shareholder-owned organisations and that the public policy approach to financial services enables mutuals to compete on equal terms.

1 The companies were:

  • Bright Grey
  • LV=
  • NFU Mutual
  • Police Mutual
  • Royal Liver
  • Royal London
  • Scottish Friendly
  • Scottish Life
  • Scottish Provident
  • Wesleyan

2Scores are based on the top two boxes of a five point scale, i.e. customers who give a rating of ‘very good/ excellent’ or ‘very/ extremely satisfied’ etc.

3 For full details, see: http://www.customerimpact.org/


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