The educational sector requires a rigorous and fair approach to insurance and risk management. It is more than just protecting buildings it is about the protecting students, staff and the multiple stakeholders within the sector.
Insurance and schools are about problem-solving and protecting people; protecting reputations, replacing damaged equipment and vehicles.
The Independent Schools’ Mutual is a key innovation for the sector. By using a well-established financial model the Mutual can bring schools closer together, creating benefits through a shared economy or bulk buying, backed by insurance and a rigorous assessment of individual claims history and projections.
Mutuals, by which I mean organisations owned by their customers, rather than external shareholders, remain an important presence in the insurance industry today, both in the UK and internationally.
UK mutuals help manage the savings, protection and healthcare need of around 30 million policyholders, they collect premium income of £20 billion a year, and employ more than one in four people involved in the insurance sector. They are not a new concept.
More relevant than their overall scale though is the impact mutuals have on their key markets: mutuals tend to be smaller than PLC insurers, and to focus on a narrower range of products, where they can build expertise and engage effectively with relevant intermediaries and consumers. They can create real change and member empowerment.
This means that when they come to pricing products, they can be more focused and sometimes better value, because the product features are wholly aligned with the needs of the customer. Without shareholder dividends to pay out, investment returns are on average significantly higher – and the business model means that mutuals can excel in customer service and claims handling: for example, in 2017 members of AFM paid out on nearly 94% of income protection claims, compared to 87% across the whole market.
The last few years have seen healthy growth in premium income for mutuals: according to the international trade body ICMIF, in the 10 years from the start of the financial crisis in 2007, mutuals increased premium income by 67%, compared to a contraction across the insurance sector as a whole of 17%. All the early signs from 2018 is that this growth trend continued.
Much of that recent success has been a result of developing a strong ethos within the organisations, which means that employees have the confidence to talk positively to customers about how a mutual or not-for-profit business model provides better outcomes to customers. An AFM survey of over 600 employees of mutual organisations in 2018 found that 98% of employees were confident that the business was run in the best interests of customers, and 97.7% were proud of the ethical record and reputation of their employer.
Mutuals are part of the wider economy, and as UK based firms, selling almost entirely to UK consumers, we also pay all the taxes due in the UK. During 2019, AFM’s health and protection members, according to research by OAC consultants, will contribute around £500 million to savings in the NHS, the welfare state and to employers.
The Independent Schools’ Mutual is part of a growing renewed purpose amongst mutuals to deliver better outcomes for their members. Innovation and change can sometimes feel daunting, but the benefits and history of mutuals mean this Mutual is a great choice for the sector, I encourage you to support the Mutual and see what benefits it can give to you.
Members will be able to see exactly how the Mutual is performing, with complete transparency of data enabling the Board to make informed decisions about the direction of the Mutual. Shared risk management, an overview of Members’ collective claims history and greater control over the claims process all help to reduce the incidence and cost of claims. Members will be able to provide deep insight into the risk needs of our sector.
Martin Shaw is chief executive of the Association of Financial Mutuals (AFM).