At its simplest level, an insurance company raises funds from the premiums charged to its customers and then pools those funds in order to pay any claims that are made by it’s customers, it’s operating costs and dividends to its shareholders.
Mutual companies are a little different, since they do not have shareholders seeking a profit from their investment they can pass on this saving to their customers.
However, being a mutual company does have some drawbacks, without any shares to sell on the capital markets they can find it harder to raise the capital they need in order to expand.
In order to strengthen this possible weakness, bodies such as the ICMIF have been formed to facilitate the collaboration between its members. Incredibly, the ICMIF now represents organizations with assets of over USD 1 trillion spread across 70 countries. Along a similar vein, the Association of Financial Mutuals is another trade body for mutual insurers in the UK with a membership representing 20 million customers and over £80 billion of assets.
Does this make them cheaper ?
There’s only one way you are going to find out for certain if your household insurance quote is cheaper and that’s to get a quote ! However, before you can compare quotes between different sources it’s important to ensure that you are comparing like-for-like. There are many variables in an insurance policy such as:
- the amount of cover
- the policy excess
- specific policy exclusions
- maximum unoccupied periods
With so many factors that can be subtly different between policies it is not always possible to make an exact comparison between policies and therefore it is essential that you ensure that the policy meets all of your requirements.
Some mutual companies offer additional loyalty rewards for renewing your policy over a number of years, others may pass more of their savings on to particular groups such as trade union members.
Getting your household insurance through a mutual company is therefore well worth looking at as an additional option to using your normal broker. The InsuranceAdviceGuide presents information on a wide range of insurance products as well as links to relevant insurance brokers.
