Mutual insurers set to multiply as affinity groups take control

The number of insurance mutuals will rise dramatically as affinity groups grow frustrated with commercial insurers, according to the Association of Mutual Insurers (AMI).

Shaun Tarbuck, chief executive of the AMI, told the Conservative party conference that the organisation currently had a pipeline of 50 insurance mutuals interested in starting up, compared with just five new mutuals that have started up in the past five years.

Tarbuck said the mutuals were currently at various stages of progression but he expects most of them to complete in the next couple of years. He said they consist mainly of large affinity groups, such as trade associations.

“The commercial insurers are out-pricing themselves; they are inefficient. That is what’s driving it really,” Tarbuck told Insurance Times. “People are sick and tired of large multinationals ripping them off.”

Tarbuck claims that mutuals can save up to 40% on their annual premiums. Recent examples of insurance mutuals include the Activities Industry Mutual, for outdoor activity centres, and the National Federation of Retail Newsagents [NFRN] mutual. Tarbuck said that NFRN members were now starting to arrange their own home and motor insurance in addition to commercial insurance.

“I do think it is a trend and hopefully one that will continue,” he added.

In related news, the Association of Friendly Societies has voted in favour of a resolution to merge with the AMI to create a new trade body representing the mutual insurance sector in the UK.

Meanwhile, the minister for local government, Rosie Winterton, said the government will give councils powers to set up mutual insurers.

This comes after Brent Council was found to have illegally set up the London Authorities Mutual Ltd (LAML).

The government will amend the Local Democracy, Economic Development and Construction Bill to give authorities legislative power to join together to set up and participate in mutual insurance companies. The amendments will be debated at the report stage of the Bill, set for this week.

Brent Council was told by the Court of Appeal in June that it did not have the necessary powers to set up LAML, after a challenge by specialist intermediary Risk Management Partners.

Winterton said: “Councils have shown that creating their own mutual insurance companies can deliver savings, but following the LAML judgment we have taken the necessary legislative steps to ensure they have the specific powers needed to do this.

“We will support councils in their efforts to make every taxpayer’s pound work even harder in the current economic climate.”