Select Committee on Treasury Written Evidence

Memorandum submitted by the Association of Mutual Insurers (AMI)

  1. I am writing in response to Treasury Committee press release No 19 which announced this inquiry, on behalf of the Association of Mutual Insurers (AMI).

  2. The Association of Mutual Insurers (AMI) has 30 members which represent 98% of the mutual insurers in the UK. In total, AMI members represent 13.3million policyholders in the UK and have £82 billion in assets. Established by affinity groups and based on the principles of self-help and of taking personal responsibility for their own insurance needs, the products and services of mutual insurers are now widely available for the benefit of all.

  3. The mutual model enables organisations to provide savings products which span the demographic range of the UK, reaching people with limited financial resources to assist them in improving their economic status. In addition, mutual insurers provide healthy competition within the insurance market. One example of this is the Child Trust Funds, where mutual insurers provide nearly half of all accounts opened in the UK.

  4. Mutual insurers do not have shareholders but are member-owned organisations. In simple terms this means they do not have external investors. This is the most significant differential between mutual insurers and proprietary companies.

  5. When referring to mutual insurers, a distinction must be made between the unclaimed policies and the estate of a mutual organisation. Unclaimed policies belong to the policyholder and, if remain unclaimed, are reinvested for the benefit of all its members. The estate of a mutual insurer comprises capital which has built up over generations and which is used for the prudent management of the organisation. The estate belongs, in its entirety, to the organisation or society and provides the totality of capital available to it. Removing the estate of a mutual organisation would seriously disadvantage the policyholder and the future of the mutual insurer.

  6. The mutual business model places member owners at the heart of the organisation with a majority based around community or affinity groups. Such a structure enables the mutual sector to be well positioned in regards to tracking down unclaimed policies because members have a close relationship with their mutual organisation. For this reason, numbers of unclaimed policies among mutual insurers are relatively few.

  7. Many products supplied by mutual insurers are long term investments made by members. All members as owners, benefit from profits made by the organisations. In that respect the model already delivers the social redistribution of assets that the enquiry proposes. The assets of mutual insurers are owned by the members; past, present and future.

  8. "Whole of life" policies and other such products provided by mutual insurers often have open-ended terms and are by no means standard. The point at which policies like this become unclaimed is hard to define.

  9. The AMI/AFS guidance on member relations issued in 2005 through the Myners report enhances the frequency with which mutual insurers communicate with members. This is another measure specifically undertaken by the mutual sector to alleviate the unclaimed policy issue.

  10. As a result of mutual insurers being owned by policyholders, they consider it their corporate responsibility to repatriate assets with their rightful owners. Significant efforts are already in place to do this and a further process would be a new expense which could only be met from members funds.

  11. AMI and its members conclude that any removal of unclaimed policies would be harmful to the sector, to the disadvantage of customers, and provide little, if any, windfall gain to the Social Investment Bank. We strongly suggest mutual insurers are exempted from any proposal to extend this inquiry beyond banking.

February 2007

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