Mutual Companies - Are they better?

What is a Mutual Insurance Company

In a nut shell, a mutual company is owned by the policy holders.
 They can not be bought out by public companies and dissappear through aquisitions.   You have a vote as to who the board of directors will be just by having a policy with the company..  The board selects the president.  They hire staff to manage the administration, sales, and accounting, issuing, underwriting, etc.  Not a lot of difference in how they are run.  The overall focus is not so much centered on profit as it is on maintaining the companies individuality. 

The history of a Mutual Insurance Company is often traced back to a time when insurance was not readily available to a certain type of individual or business.  A group of similar minded people would get together and start a  Mutual Insurance Company to solve their problems.  Most of these Mutual Insurance Companies date back over 100 years.    Their roots dictate a more balanced approach on the delivery of insurance where personalized service and moral conduct are an intigral part of the company culture. 

Many of them you may never hear about.  Portage La Praire & Wawanesa Mutual based in Manitoba, Saskatchewan Mutual and Mennonite Mutual in Saskatchewan, Economical Mutual and Mutual of BC are ones you may have heard about and recognize.  There are many more that you may not have heard about.  (Economical Mutual is planning to de-mutualize).  

What is different about Mutual Insurance Companies?

Insurance Companies have to have a certain amount of reserve cash  for every dollar of insurance they provide to the public.  If an insurance company wants to expand they have to have the capital available to meet the reserve requirements.

If a public insurance company wants to expand, the capital needed can easily be raised by offering and selling shares.  In most cases this is done through a public offering.

When a mutual insurance company wants to expand they have do so by retaining profits.   Any of these retained earnings (profits) rightly belong to the policy holders.   So, most Mutual Companies expand through their own efforts and results.  If profits are high a mutual company may choose to return premiums to the policy holders. 

Mutual Companies tend to grow more slowly.  They also tend to be cautious. 

Are Mutual Insurance Companies better to deal with?

The positive side to a Mutual Insurance Company's slower growth and cautious attitude is stability.   Mutual Insurance Companies generally offer far more personalized service to the broker and public.  They tend to keep premiums stable and predictable.   They tend to appoint fewer brokers and establish closer relationships with brokers.  The reason they do so is to prevent the capital problems with selling to much insurance too fast and to prevent anti-selection.   They want to deal with offices that will give them a good book of business rather than just writing clients they have a hard time placing with their regular or favorite company. 

Mutual Insurance Companies appeal to people who prefer stability and predictability over price alone.

My Take on Mutual Insurance Companies
1.  Underwriters tend to be far more hands on and open.  This means that I have more ability to negotiate terms rather than having to follow the exact terms in the manual.
2.  They tend to be more sympathetic to a policy holder's personal circumstances when problems arise.
3.  They tend to do more of the work.  This allows me more time to serve customers rather than doing the insurance company's administration for them.
4.  They do not venture into high risk commercial accounts.  They like stable predictible customers and base their service program in order to achieve loyalty.   They recognize their limitations. 
5.  They tend to have longer term employees because they are usually based in smaller centers.  Familiarity is a big advantage for me as a broker.  Building trust in any relationship requires time. 
6.  They do not try to be all things to all people.  Their mandate is to serve the average client well and develope product that appeals to those people.  Average people account for 80% of consumers. 
7.  Most of the companies still have real live receptionists which tells you something about how they view their policy holders, and brokers.

If you have gotten the impression that I like to deal with Mutual Insuance Companies you would be right. 

Call the No Hassle Insurance Guy  306-821-1520 (Cell) for a quote or to ask a question you would like answered the this blog.  Of course you can make a comment below as well and I will read and comment on it.