Mutual insurers must focus on their strengths, according to Matthew Mosher of insurance ratings agency A.M. Best.
Mr Mosher said: “There are positives and negatives on the [mutual and public company] structures. The environment today is much more focused on being there to help my neighbour. There is an extreme positive there right now for the co-operative and mutual sector.
“How do you take advantage of the positives in your sector? The key thing is to get the basics right. The first [issue is], what is your product design? If you are going to take advantage of being a mutual, then concentrate on the value of services. It’s not just about being a mutual. You need to be there in terms of customer service and claims handling. Claims handling is probably the best marketing tool that you can have.
“The other issue is underwriting risk. Have you have made the right differentiation between good risks and bad risks? It’s about understanding the risks that you have. “ What insurance customers do not want, said Mosher, is to feel that they are paying for the bad risks of other customers.
Mutual insurers also need to ensure they have “adequate pricing”, said Mosher. “The concern for the companies [is if] they don’t understand the poor risks,” he explained. “That they are being taken advantage of by poor risks. Do you know the profitability of your business? This is the fundamental of understanding your business.
“Ask yourself, ‘what is it that you do differently?’ Someone can always come back and compete on price. If it comes to service, that is difficult for someone to come back on you at.”
Mosher said that while stricter regulation was being imposed by regulators, businesses had to recognise that effective risk management was vital for the business itself, not just for regulators. But mutual insurers had to also recognise there were differences between them and public companies.
“You need to recognise that as a mutual your willingness to absorb losses in a certain time frame might be less than for those in a public company,” said Mosher. “You need to decide what is an acceptable level of risk and loss.” He added that risk management theory and practice continues to evolve and must be embedded across organisations.