AFM welcomes 8 new member companies from the BHCA
On 1 January 2017, members of the British Health Care Association transferred their membership to AFM. This brings AFM membership now to 47, with another 22 Associate members.
The new members are all health cash plan providers, and are run on a not-for-profit basis. This reinforces AFM's growing role in healthcare and protection, and strengthens its voice for representing small insurers run in the best interests of their members.
To coincide with the widened membership, AFM is establishing a new Healthcare and Protection Committee, and is redesigning its website to stress the increasing focus on healthcare. The BHCA website has now closed, though their branding will be retained on AFM's website and, for two year's at least, on its health related project work.
The new members are:
- BHSF
- HSF Health Plan
- Medicash
- Orchard Healthcare
- Plutus Health
- UK Healthcare
- Westfield Health
- WHA Healthcare
The new members from BHCA join Paycare and Sovereign Health Care, who were previously members of both BHCA and AFM.
British Health Care Association joins forces with AFM
The Association of Financial Mutuals (AFM) and The British Healthcare Association (BHCA) announce today that they will merge – a move, which bolsters their membership of financial mutuals and not-for-profit insurers, and confirms them as a stronger force in the healthcare sector.
For more, click here.
The University of Oxford has launched a new report on 'Collaboration and partnership driving growth in the UK financial mutuals sector'. The report was sponsored by AFM alongside the Building Societies Association.
To see the press release, including a quote from AFM, click here.
To read the full report, click here.
Association of Financial Mutuals appoints new Chairman and vice-Chairman
April 2016
The Association of Financial Mutuals (AFM) – the trade body that represents mutual insurers, friendly societies and other financial mutuals in the UK – have appointed a new Chairman and Vice-Chairman.
At its March 2016 meeting the Board approved the appointment of Andy Chapman, Chief Executive of The Exeter as Chairman, and of Jane Nelson, Chief Executive of The Oddfellows as Vice-Chairman.
Both have served on the AFM Board for a number of years, and were appointed following approval by members of a new strategy in January, that will see AFM’s activities focus on the interests of smaller mutuals and friendly societies.
Andy Chapman has been Chief Executive of The Exeter since March 2008, when the organisation as it is today was created, merging together two friendly societies with a rich heritage in income protection and private medical insurance. The insurer has been a Cover Excellence awards winner in each of the last five years.
Andy Chapman, Chairman of the Association of Financial Mutuals commented: “I’m delighted to become the latest Chairman of AFM. The mutual insurance sector has grown 40% since 2007, in contrast to the UK insurance sector as a whole which has shrunk by 20% since the start of the financial crisis. With 30 million policyholders, the sector is highly trusted by its customers and offers a real alternative to PLC insurers. Small mutuals in particular have demonstrated a real flair for developing new products and innovative ways of working, and it will be a great pleasure for me to spread the word about the importance of a thriving mutual sector.”
Jane Nelson joined The Oddfellows in 1995 as Financial Controller, and then Finance Director, and became its Chief Executive in 2012. The Society is over 200 years old, and through that time has combined the provision of savings and insurance plans with a wide range of social activities and the provision of care support across the UK.
Commenting on her appointment, Jane said: "I am very pleased to have been appointed Vice-chair of AFM. The trade body combines its role of championing mutuality with a commitment to helping its members work in the best interests of their customers. This is crucial to the success of the mutual sector in the future.”
The February edition of "Governance News" can be downloaded here: /files/files/governance update, 0216.pdf
AFM's comments on the possible impact on mutual insurers of a decision by the UK to leave the European Union:
“Mutual insurers in the UK grew rapidly in the industrial revolution to serve local communities and trades, and they continue to work as part of those communities today. Almost all the members of mutuals live in the UK, and mutuals employ all their staff here, pay their taxes here, and invest their assets predominantly in companies, government gilts and property in the UK. Regardless of the result in the June referendum, with a focus solely on serving UK consumers, mutual insurers are unlikely to change a business model that has enabled them to grow more rapidly in recent years than the British insurance industry as a whole. AFM research shows people trust mutuals more than PLCs, so during any uncertainty in the aftermath of the referendum mutuals could see a greater surge in business activity.
"If there is a decision to leave the EU, the most apparent impact on most mutuals will be the effect on the wider economy; for example how it affects the investment climate, interest rates and general prosperity. Regulation is another key issue: in recent years the majority of insurance regulation has emanated from Europe, particularly via Solvency 2, and this has coincided with a time of closer scrutiny and much higher compliance costs. Much of the UK rulebook will need to be rewritten, though as the UK regulators have actively embraced European rules, and as issues such as consumer protection and effective stewardship are now universally accepted, it is unclear that the tone of regulation would change significantly.
“More generally, the nature of mutuality is about people coming together to create shared solutions to common problems, and we expect to continue working with and learning from the experiences of other mutuals, both in the UK and abroad, whatever happens."
Mike Rogers, CEO of LV= is next chairman of the Association of Financial Mutuals
AFM adopts good corporate governance, by appointing its board of directors on an annual basis. At its meeting on 8 July, the outgoing AFM Board approved the appointment of the incoming Board. As Mark Goodale, CEO of Reliance Mutual had served the maximum term of three years as chair that is permitted by our constitution, he duly stood down and the Board appointed Mike Rogers, Group Chief Executive of LV= as his successor.
On his appointment, Mike Rogers said: “As Chief Executive of one of the UK’s largest mutuals I am pleased to be able to take an active role in how we can best shape our industry to ensure we are well placed for the future. I believe that our mutual status gives us the ability to truly act in our members' and customers' best interests. The mutual model is not an old-fashioned one, in fact it is very modern and relevant to today’s economic environment and key to the success of the overall financial services sector. I look forward to being able to use my knowledge and skills to support the work of the AFM in the chairman role.”
Obtaining additional ISA allowances following the death of your spouse or civil partner
Since 3 December 2014, where a person holding an ISA dies and that person was married or in a civil partnership, the surviving spouse/civil partner is entitled to an extra ISA allowance equal to the value of the ISA(s) held by their spouse/civil partner (even where the spouse/civil partner does not actually inherit the ISA). This is referred to as the Additional Permitted Subscription (APS) allowance.
The attached leaflet is available for use by all members and can be saved, printed or copied as required.
The Mutuals' Deferred Shares Act received royal assent in the House of Lords yesterday evening.
This was only possible because of the dedicated support from Lord Naseby and Jonathan Evans MP, as well as the commitment of the Treasury to ensure the Bill progressed swiftly enough through the parliamentary process.
AFM met with Treasury earlier this month to explore how to maintain momentum: before mutual insurers can begin to create new share capital there is a need for secondary legislation and regulatory approval. Treasury has agreed to convene a working group with a range of interested parties, so that by the time the next Treasury Minister is appointed, there is a clear picture of how the shares will operate.
The range of discussions will include ensuring the shares count as regulatory capital, enabling retail consumers to buy the shares, determine how small as well as larger mutuals might take advantage of the shares, how the new capital opportunities available to the sector can contribute to a stronger mutual market more generally.
Commenting today, LV= chairman Mark Austen said: “We hope this marks a turning point in the legislative and regulatory attitude towards these ownership models to ensure their further development as an important and diverse part of the financial services industry.”
Royal Assent was granted during the prorogation process, marking the end of the parliamentary term. During the same session, the Deregulation Act was given Royal Assent, which includes the legislation necessary to permit the transfer, from 6 April 2015, of Child Trust Fund accounts to Junior ISAs.
Mutuals' Deferred Shares Bill completes third and final reading in the House of Commons
The Mutuals’ Deferred Shares Bill is an important milestone for the mutual insurers: it is the first piece of legislation dedicated to the sector since 1995. Back then, mutuals accounted for over half the UK insurance industry; today the mutual insurance industry is one of the smallest in Europe, so this legislation cannot come too soon.
Hence we are very grateful that the Private Members’ Bill enjoyed swifter than usual progress, both in the House of Lords, where it originated under the wise guidance of Lord Naseby, and since December where Jonathan Evans MP took it forward in the Commons. They are two long-term supporters of mutuals, and are very familiar with the difficulties of raising capital in member-owned organisations, so we are very appreciative of their hard work in taking forward the vision of a new form of mutual share. We also fully appreciate the cross-party support the Bill benefited from, as well as strong Treasury support for the Bill, which have given it the best chance possible of completing its passage before the end of the parliamentary term.
The effect of the Bill will be to allow mutual insurers and friendly societies to raise capital via a new form of mutual deferred share. This matters because at present mutuals can only increase their capital slowly and by retaining profits. This has stifled the growth of the sector, and prevented them from competing effectively with PLCs even when, during the financial crisis, there was renewed demand for products from mutuals who are seen as trustworthy providers working in the best interest of their customers. These shares will enable mutuals to develop new products, to achieve economies of scale, and widen mutual ownership. They provide a critical alternative to the widescale demutualisation that has blighted the sector. This will help ensure that in any future financial crisis, there is a lower risk of discontinuity of supply for consumers.
Holders of the shares will be a member of the society, though irrespective of their holding will only have one vote. Regulation will set out in future how mutual shares might be issued, but we would hope that they would be available to existing customers of mutual organisations. As many mutuals are small organisations, we might also see groups of mutuals working together to issue shares.
Speaking in the report stage of the Bill in the Commons today, Shadow Chief Secretary to the Treasury, Chris Leslie MP highlighted the work of the AFM, the BSA and Mutuo, on raising the need for action on capital in mutuals, and to safeguard ownership and integrity of mutual organisations. The Economic Secretary to the Treasury, Andrea Leadsom MP highlighted the importance of the Bill and the value of cross party support. She indicated the sector had demonstrated a clear need and demand for this Bill. Tony Baldry MP (Conservative) highlighted the dramatic effect that demutualisation had had, using AFM data on with-profits investments, to highlight the importance of retaining a strong mutual sector.
The Bill moved onto its third reading, during which Jonathan Evans MP highlighted the role of the sector over hundreds of years in supporting local communities. He summarised his own commitment to navigating the Bill through the Commons by saying: “If there is any better way to draw an end to my service in this house, it is I think in doing something which ensures the mutual principle that my grandfather contributed to, is carried forward by this measure.” (Mr Evans’ grandfather was an active member of the Tredegar Medical Aid Society, that Aneurin Bevan adopted as the inspiration for the NHS. Mr Evans is standing down as an MP at the general election.)
The Economic Secretary paid tribute to both Mr Evans and Lord Naseby, and confirmed the government’s support for the Bill. Treasury will consult with the PRA and FCA as soon as the Bill receives Royal Assent, to ensure the procedures are right, and will work this through as quickly as possible. In the Economic Secretary’s opinion “it’s a short Bill but one that provides a huge opportunity for the mutual sector”. The Bill was passed with unanimous support.
This is further good news for the mutual insurance sector, in a week that saw the launch of the first new retail mutual for 20 years when The Military Mutual opened for new business.
New research partnership launched to investigate the strategic application of mutual values
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The financial mutuals sector makes a vital contribution to the UK financial services industry. Research has shown that corporate diversity, a key factor in the health of the financial services industry, has declined. This is a matter for concern, particularly when financial services must respond to calls for a new culture, a revived concern for the customer and the delivery of fairly priced services which meet everyday needs. To promote a sustainable and diverse sector of financial and banking mutuals, it is crucial to examine key factors for its success, which might include a more equitable operating environment, better ways of working and to encourage the emergence of new financial mutuals.
It is in this context that The Building Societies Association (BSA), the Association of Financial Mutuals (AFM), and the Centre for Mutual and Employee-owned Business at Kellogg College, University of Oxford have announced a research partnership to investigate the strategic application of the values and principles of mutuality, and the contribution these can make to fostering the sector’s growth. The project will examine potential strategic drivers, such as leadership, culture and inter-organisational collaboration. The study will also examine the contribution that mutuality can make to create a compelling vision for the broader financial services sector, based upon improving people’s lives.
The aim of this project is to find ways to help financial mutuals gain greater market share and to contribute to the creation of a renewed vision for the financial services sector, grounded in restored trust and collaboration for mutual benefit.
The research will be managed by Dr Ruth Yeoman, Research Fellow at the Centre for Mutual and Employee-owned Business. The output will be a set of practical recommendations to the sector which will also contribute to policy making. It is envisaged that the research will begin with an initial six-month project leading to a longer term research programme with Oxford and other academic partners.
Professor Jonathan Michie, Director of the Centre for Mutual and Employee-owned Business said: “The UK economy has long suffered from a lack of corporate diversity. This was exacerbated by demutualisation. We have paid the price for being dominated by ‘too big to fail’ PLC banks. It is important – and urgent – to promote a more corporately diverse financial services sector, and for this we need a renaissance of mutuality.”
Martin Shaw, Chief Executive of the Association of Financial Mutuals (AFM) said: “There are many factors contributing to the changing shape of financial services provision in the UK, from technology to demographics to regulation and consumer buying habits. A profound change in the last 30 years has been the tumbling level of corporate diversity which has reduced choice for consumers and stagnated innovation. This new project will help to better understand how we might witness a renaissance in the mutual sector, and with it a more effective market for financial services.”
Robin Fieth, Chief Executive of the Building Societies Association (BSA) said: “The financial services market is well sighted on diversity of product but not on diversity of provider. This is not a nice to have, it’s integral to a properly functioning and sustainable competitive landscape, and adds to the stability of financial markets. Mortgage lending has recovered well since the crisis, led by the building society sector with its strong base of retail deposits to draw on. This is in stark contrast to SME lending which is so heavily dependent on corporate banks. This project will help us to draw out what comes next in creating that compelling vision for financial mutuals as a core part of the financial services sector in the 21st century.”
For more, go to: http://www.kellogg.ox.ac.uk/MEOB-Research-2014#attachments
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Culture and diversity in financial services
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Earlier this month the Association of Financial Mutuals and the Building Societies Association launched the ‘Manifesto for Financial Mutuals’, to highlight to the political parties ahead of next year’s general election, how a more effective regime for financial mutuals would help consumers to get a fairer deal from the financial services industry. Our proposals largely support existing government policy to restore trust in the industry, and to ‘promote diversity and support mutuals’.
In the few days since, a host of new reports has further strengthened these messages:
• The Social Markets Foundation on Monday launched a report on “Good culture: does the model matter in financial services?”: which found that most people believe financial companies put the interests of shareholders ahead of customers. Their report sees a need to improve corporate diversity in financial services, as a means of protecting and supporting consumers, and that establishing the right culture is key to this. Speaking at the launch event, the Economic Secretary indicated that people are “sick and tired of the scandals in financial services”, and explained the extensive work underway to address failings in corporate culture, including work to promote new sources of finance including via mutuals. In turn, Mark Austen, Chairman of LV=, who sponsored the report, emphasised how their values deliver a good culture and how this in turn has stimulated their recent success.
• Also on Monday, the Building Societies Association issued an updated corporate diversity index for financial services, which showed a decline in diversity in the mortgage and savings markets in 2013. Commenting on the report, the Economic Secretary stated that “Corporate diversity is vitally important in financial services… to help customers get a better deal”.
• Another think tank, New City Agenda has today launched a report on the culture of retail banking in the UK, citing that British banks have since 2000 paid £38 billion in fines relating to their retail businesses, and since 2008 have received over 20 million customer complaints. Policy intervention since has focused on structural changes, whilst cultural change has been left largely to industry to address. The report found that aggressive sales culture was particularly prevalent amongst demutualised building societies, whilst in contrast the majority of organisations offering the best service in banking were mutuals.
• Today again the Prudential Regulatory Authority has issued a consultationsetting out its plans for a new ‘Senior Insurance Managers Regime’, to ensure leaders of insurers behave with integrity, honesty and skill- or suffer the consequences directly. This is complemented by a consultation by the Financial Conduct Authority on changes to its Approved Persons Regime.
• Earlier this month AFM released an updated version of the Annotated Corporate Governance Code for Mutual Insurers, with clear messages about the importance of the ‘tone from the top’, and the continuing need for Boards to lead the right culture in their organisations.
So it seems that there is a healthy debate about how culture and diversity fit at present. That isn't to pretend that the culture in mutuals is right for all organisations, or even that culture is right in all mutuals, but as the Manifesto document emphasises, a diverse market for financial services is more likely to produce good outcomes for consumers.
If you have a view on the issue, let me know; our Twitter account is @ownedbyyou.
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