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.