Let's Talk Income Protection

The Untapped Power of Mutual and Friendly Societies in Income Protection

• Income Protection Task Force • Season 2 • Episode 3

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In this month's episode, Matt and Stevie explore the unique role of mutual societies and friendly societies in the income protection market, examining their history, customer benefits, and future growth potential under the new Labour government by speaking to Andrew Morris, CEO of Cirencester Friendly and Nicola Huxley of Sphere Financial Services

Listen now to learn more about:

• How Mutuals and friendlies are owned by members (policyholders) rather than shareholders
• How these societies often excel at providing cover for clients with niche occupations or pre-existing conditions
• The Labour government's commitment to doubling the size of the mutual finance sector as part of its manifesto
• How Nicola Huxley's insights into focusing on multi-policy rather than multi-benefit sourcing to help identify mutual options
• How mutuals reinvest profits to benefit members
• Mutuals often provide more personalised underwriting and claims experiences
• The legislative challenges the sector faces,  but the significant growth opportunities
• How experienced advisers can leverage mutual partnerships for enhanced client retention and business growth

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Produced and edited by SEA Studios

Speaker 1:

Hello and welcome to let's Talk Income Protection, season 2, episode 3. This is the podcast that breaks down everything you need to know about income protection, whether you're an experienced advisor or just starting out. This podcast will give you actionable insights and advice and, of course, gain valuable unstructured CPT points. I'm Stevie Anoldi, mr Croaky Boy, today the content associate for the IPTF, and I'm joined, as always, by Matt Chapman.

Speaker 2:

Mr Chapman, how are you? I'm very well, stevie. I don't have a croaky voice so unfortunately I'm sorry to hear you're not feeling too well, but listen, I'm sure it's still going to be an action-packed, fun-filled and really impactful podcast. Either way.

Speaker 1:

Of course, we've got to power through. So this year, the IPTF is shining a spotlight on different areas of insurance, and one particular area that has a spotlight on it already is mutuals and friendlies. Why? Well, the labour government has committed to growing the co-op and mutual finance sectors as part of their 28 billion pound manifesto pledge, with the aim to, and I quote, unlock the full potential of the mutual sector to support regional development and aim to double the size of the UK's cooperative and mutual financial services sector. Now, this all sounds rather exciting for the industry, but before we get into that, matt, let's start from the beginning, shall we? Because I have no idea what they're talking about. What even are mutuals and friendlies, and how are they different to usual providers?

Speaker 2:

that's a very good question, I think, probably one that many advisors don't know or even struggle with when they come into the industry.

Speaker 2:

So the main fundamental difference is and imagine it like a building society versus a bank it's probably about the best analogy I can give you. So the best way to think about it is your typical corporate insurance provider is going to be owned by a group of shareholders or by another corporation and pretty much it's going to be operated, of course, to provide solutions and products to its customers, but predominantly with a view to making a profit right, whereas a mutual and a friendly is typically run for the benefit of its members and the policyholders that hold contracts with the provider are those same members. That's the key difference. Interestingly and I wasn't fully aware of this, but actually all mutuals start out as friendly societies and those are like voluntary groups that kind of hold social gatherings when they meet and they go to make their payments. But over time, with the introduction of sort of the modern insurance and financial services regulation, friendly societies actually grew into the mutuals that we have today.

Speaker 1:

And is there a difference, Matt, between a mutual and a friendlies?

Speaker 2:

So one of the best ways to answer that question is to visit Royal London's website, where they talk about what is a mutual and where they start from. So it basically says that all financial companies that in the UK fall into two main groups. These are public limited companies so the mainstream providers we were just talking about, and the mutuals. So mutuals make up a really important share of the insurance market around the world and even Royal London in particular is one of them. But mutuals start out as friendly societies, which are voluntary groups that hold social gatherings when meetings to make their payments. But over time, with the introduction of modern insurance and regulation, friendly societies grew into the mutuals that we have today.

Speaker 1:

Right, okay, got it. So who in the industry are a mutual or friendly.

Speaker 2:

So some examples might be scottish friendly, british friendly, holloway friendly, the exeter royal, london lv and siren Friendly, to name a few.

Speaker 1:

Ah well, funny, you should mention Siren Sister Friendly, Matt, because and cheeky segue here I will be speaking later to Andy Morris, ceo of Siren Sister Friendly, to hear more about the history, the present day and the exciting future of the sector. But before that, matt, you're going to be speaking to Nicola Huxley to get that advisor view, isn't that right, matt?

Speaker 2:

Absolutely so. Nicola is a brilliant advisor. She's really come on leaps and bounds in the last few years, moving more from a mortgage-based advice position into being exclusively doing the protection within her firm sphere. And yeah, she's. She's going to explain how she approaches, using friendly societies and mutuals, why she does so and going to give some top tips and advices on how they might be able to do the same fantastic.

Speaker 1:

We'll then listen to your messages and answer your burning questions. So if you want to feature on a future episode, please go to speakpipecom, forward slash letstalkipodcast or email us at info at iptfcouk. After that we give you your actionable takeaways, which will be aimed at different levels of IP knowledge, before Matt wraps everything up in a nice little bow with his conclusions of today's episode. All this and more on this month's episode of let's Talk Income Protection. But first Matt is chatting to Nicola Huxley, founder and co-director of Sphere Financial Services. Indeed.

Speaker 2:

Let's have a chat with her Right. Well, this is the bit that I have been looking forward to. I have got my good friend and exceptional advisor, nicola Huxley, here from Sphere. How are you?

Speaker 3:

I'm good Thanks. I'm good Thanks, and I'm excited to be here too.

Speaker 2:

Yeah, I'm genuinely I'm really glad to have you on Now. You and I have known each other for some time and I've always been impressed with the journey that you've been on, so tell us a little bit about what's been happening for you in the last couple of years.

Speaker 3:

So for me, in the last couple of years I got to live my dream really, Started off by doing some coaching with Ash Borland, hinted to him at the beginning that my dream would be to focus on protection and leave the mortgages I've been doing for 25 years almost to one side and then worked on a plan towards achieving that really and as a result of that now I now head up the protection team in our firm. I get to live, breathe, eat and sleep protection, which was always my passion but it's ended up with me doing podcasts and lots and lots of videos and looking at my own face and then, but loving it, absolutely loving it, being focused on the thing that I'm passionate about.

Speaker 2:

Absolutely, and you know what you come across so well. So, obviously, I've watched a lot of your content online. You've been brilliant at kind of doing the storytelling side of it and kind of bringing the need for things like income protection to life, and I think that's often where advisors kind of struggle in terms of how to convey the message to consumers. So I think it'd be well worth following Nicola. If you get an opportunity, have a look at some of the posts she's done. I think you'll find it really, really helpful.

Speaker 2:

Now, today we're talking about mutuals and friendly societies. Now, this is an area that I know you're very passionate about. You're fortunate you're part of the Primus Mortgage Network, aren't you? So you've got a fairly comprehensive panel of providers you can access, which include all your mainstream providers, but also quite a large range of mutuals and friendlies, so that you've got this nice spread of options that's really useful for advisors in terms of when you come across a customer and you want to make sure you provide the best possible outcome. When you come across a customer and you want to make sure you provide the best possible outcome, having that range can be quite helpful. So what draws you to use a mutual or friendly as an option when you're thinking about arranging income protection for your clients.

Speaker 3:

So I think for me it's that it's evolved over the transition of me putting income protection further up the pecking order, and that's over the last couple of years. That's what's happened, probably since COVID actually which is, I know, it's one of your big things it was furlough and it drove this need for me to change over the order of my advice. And I think in the past I'd always seen the friendlies. I knew they were there but I was a bit afraid of them. To be honest, I was mainly doing life. I've always done a lot of fib but then doing critical illness cover and that involves a very menu approach to how you do things. And the friendlies were there around the edges. I didn't see them very often.

Speaker 3:

And then, once I started putting income protection in, I very quickly worked out that the menu wasn't going to work anymore and income protection is more bespoke. So you've got to pull it almost out of that thinking. And then the menus were that the friendlies and the mutuals were that high on the list. I couldn't ignore them anymore and I couldn't, you know, justify that. Um, so sat down to talk with everyone about what it is they do, how they do it and reorder my thinking really from them being down on my pecking order to being very high on my pecking order once I'd had those conversations with the mutuals and appreciated them being on my list, which I don't think I had done before I don't even think I'd realized that there was a lot of people that didn't have access to these wonderful places where their passion for income protection in particular is so strong.

Speaker 2:

Absolutely. I mean, I think for me there are significant benefits and advantages to having access to these mutuals. You know, from my perspective when I was advising, it was always occupations in particular with income protection an area of challenge, and a lot of the traditional insurers you know, whether they're penalising, not deliberately, but just because of the risk profile that they've got, or whether it's more challenging to place that type of business. Having access to those products is really crucial. And as I think about the evolution that I went through as an advisor, it's probably very similar to your journey in that when you first start out you're not truly aware of these firms. I mean, we've all kind of heard a lot of the names the legal in general, the Avivas, the large organizations that we kind of see well advertised, well promoted, and the friendlies and the mutuals that sat on the panel I was operating with. I wasn't overly familiar with them.

Speaker 3:

So I mean I'm assuming you would encourage advisors that have access to these providers to get the BDMs, get members of those organizations in to explain some of the merits of using their services. Yeah, they're all very people-led, so speak to their people, because the people in there, I think, are very, very passionate about the products that they're talking about and the value-added services that come with the mutuals and the friendlies are incredible, Like some of them are. They're definitely on a par with the ones you get from the big insurers. Some of them have some extra nice things around the edges, but you've got to get in and talk to them about those bits that are important in income protection, rehabilitation, preventative measures for stopping people needing to make a claim, Income protection that's part of your advice and they've thought about all of that and really promote all of that within the people. But you've got to do the back work. You've got to do the homework really and make sure that you understand the products and the companies and what they stand for. Yeah, bar a few.

Speaker 2:

They're all pretty much income protection exclusive anyway, aren't they? So this is their bread and butter. This is kind of what they do day in, day out, and I think one of the things that struck me when I started working with the mutuals a bit more closely and then and then towards the end I found that they were taking a lion's share of my business for no other reason than actually I realized that they were very sort of like you said, people led, um, they were very lenient on certain occupations and I was getting quite a lot of particular occupations quite challenging to place with some of the traditional insurers Through no fault of their own. It's just the way the models are built and it just allowed me access to solutions quite quickly and I started to gain a lot of confidence with them. When I spoke to advisors, a lot of them don't actually understand the distinction between sort of a traditional corporate-based insurance provider you know, either privately or publicly owned versus a mutual and how they operate. And it was only when I really kind of got my head around and I saw the value of having a firm that basically brings individuals in as members and then those rewards are shared.

Speaker 2:

I remember when I first started out in the industry, we actually saw examples of cash going back to members. Premiums being reduced I appreciate that's probably unlikely to happen these days. Premiums being reduced I appreciate that's probably unlikely to happen these days, but it was still. It was nice to see an opportunity that they were actually passing some of these profits or savings back to the consumer to ensure that they kept the policies going and made them more cost effective. No-transcript. So if you could give your thoughts about some of the potential missed opportunities when people are focusing on, you know, doing menu plans and what might that mean from their sourcing?

Speaker 3:

Yeah, so for me we don't do very many menu plans full stop. We'll group things together when it makes sense to, but that wasn't always the case. I previously was a busy mortgage advisor trying to do things as quick as I could, and that means one application is much easier than doing three or four applications. It's easier for your compliance, it's all those things, and switching over to specialism has made a difference in that. So I get it from the advisor point of view and I guess in that my advice would be just don't include your income protection in that menu. It may accidentally end up with the same insurer as the rest of your cover.

Speaker 3:

But if you're just searching menu plans you're not getting the majority of these mutuals or friendlies, even in your response, because they don't have anything else to put into the menu. Some of them they're just doing income protection. I mean, everyone will use different sourcing systems, but I use multi-policy as my start point, not multi-benefit. And then you can pick who you're going to be and if three of them happen to be with one person, you can then put three of them with one person and see how that works out. But just take that extra minute or two to do multi-policies, your start point, your criticalness, might end up in the same part as your life insurance by time you're finished and it's likely to, and you can save yourself some time by doing that. But the income protection you're cutting down the options for your client if you don't put it separate.

Speaker 3:

But also, like you said this, you know, looking at the occupations, looking at the ability to flex around with your waiting periods, your deferred periods, your extras, you know how much your fracture cover costs, whether it's covered as standard.

Speaker 3:

When you're thinking about those occupations you've got in front of you and the impact of those things Sport, sporting pastimes and hobbies they you know the mutuals and the friendlies are far, far better with those hobbies and past times, and underwriting as well, like because underwriting is going to cause you a little bit more of a headache on income protection than it will do on critical illness cover.

Speaker 3:

So you need to think about what the outcome is going to be with the friendlies I mean some of them, for example. Um, at least have the good grace, if they're going to exclude something, to then discount your premium, which is something I absolutely love like, okay, we won't cover that, but here's your discount for it, which is perfect because at least you say can save the client. Really upsetting because we can't get cover for that. Um, I've spoken to the underwriter, which is the great thing you can do as well is have a chat to the underwriter, pick up the phone, tell them of the background for it, and to split it out when you're sourcing means you've got the options to do all of that that you're doing yourself and your client out of if you just press one button and do multi-benefit straight away.

Speaker 2:

Now that makes perfect sense. We're not limiting the potential solutions because of our own preconceived biases and assumptions. Yeah, no, I think that's a really important point. Now, naturally, there's pros and cons to using friendlies and mutuals, but what I'm really interested to think about is in terms of trying to get policies on risk and the idea that you know and I was guilty of this when I first started out when I saw a friendly, I maybe made a negative assumption around the size of the organization, maybe their fiscal capabilities, maybe their strength as an insurer, and that's wrong. That's wrong to think that way. But one of the advantages of the being smaller is that because they're smaller, you get slightly more personalized service. That means maybe you get to speak directly with a specific underwriter, or maybe because of their size, they're a little bit leaner and a bit more flexible and a little bit more adaptable, so they tend to take on some of the underwriting challenges that maybe other insurers, maybe the mainstream ones, wouldn't have.

Speaker 3:

You got any examples that you could share that might shed a bit of light for advisors listening on how they can potentially be a bit more lenient in that space yeah, we were actually speaking to one of them recently about we had someone who has just very recently had eight weeks off work because her dad was diagnosed terminally ill, so took eight weeks off work, um, in order to spend some time with her dad, help care. Go back now. There was lots of people who, for that, were creating a stress anxiety narrative. That would be uh last forever.

Speaker 3:

Um won't go away anywhere, um, and although it was really really situational, um, they didn't want the backstory like nobody's asking the backstory of why it's so recent what's happening, why is she doing that? She just wanted the time to do it and she needs to be off work and all those things. But we were able to pick up the phone, ask about it, ask how long she was going to have to be back at work, get some leniency on that and get a timeframe that we were able to review it if nothing else had happened in that time. We appreciated it was very close so we couldn't do anything else, but actually it was really really useful and liberating for us to give that client the reassurance having spoken to somebody who listened and you know something?

Speaker 2:

it's not. We're not sitting here saying that a mainstream insurer wouldn't do the same thing, but what we're saying is the vast majority of the mutuals have a far more personalized approach, just purely because of the size of the organization and the fact that they're not using generalized underwriting engines when making those types of decisions. So I think, yeah, it's important to note. We're not sitting here saying that mainstream. It's just simply that from your experience and and mine's been very similar that just the general size and lean nature of the organization is that you tend to get more personal underwriting decisions. You get a more human-based approach. I suppose is probably the best way of positioning it.

Speaker 3:

Yeah, I was going to say it's almost like where that falls down a little bit in that, you know, lots of us these days now use Underwrite Me as part of our pre-tool and a lot of the friendlies aren't on there and part of my job, I think, when I'm using Direct Me is to use it to collect all the information, and sometimes it means I use insurers through there and sometimes it doesn't.

Speaker 3:

And again the friendlies suffer a little bit at that hand because a lot of them have slightly different question sets. Siren Sester, for example, ask a lot more questions in their application than other ones do, but for the right reasons, because the more information they've got, the better they see the outcome being, as opposed to that tick box. Answer these questions and then we'll make a decision. They want to know a bit more, but again, the thing that makes your life easier you've got to kind of go outside of that to make life sometimes better for your client because you've got to be personal. Income protection is so different per person. Therefore your solution is different per person and you've got to have the right solutions in there, not be ignoring them.

Speaker 2:

I couldn't agree more. And naturally, income protection for me, whilst it is the most comprehensive of the solutions that we have in our toolkit, also has one of the higher risks of a potentially poor outcome for customers. If we don't do this groundwork early on, and if we make a load of assumptions and if we don't do the research and consider these types of providers, we could run the risk of producing a worse customer outcome than if we didn't. I think what would be really interesting at this point, if it's okay, I'm going to ask you a couple of questions too. One is what are some of the advantages, the pros, the benefits of using a mutual over, say, maybe a more traditional insurance provider?

Speaker 3:

from your experience, I think you alluded to it before. I think occupations makes a big difference and the pricing of those occupations in terms of they tend to have a client that they want to look after. They've been there a long time, they know what they're good at and they price in those markets accordingly. So you'll see very different pricing structures per occupation for a mutual or a friendly, and it's more obvious than it is on any of the other occupations as well. But it means they understand those occupations that they're good. It means they understand those occupations that they're good at. They understand what might keep them off work. They understand that, the challenges they might have doing those particular jobs and they're good at it.

Speaker 3:

And then it is the care I mean. And it's not to say that the big insurers aren't doing their job and they're not playing the claims they're not caring about along the way. But I feel like when you go smaller they're more invested in whether that claim gets paid and whether your client gets a good outcome at the other end. I mean touch wood, because for me my income protection has ramped up dramatically over the last couple of years. I've not got to the point where I've had many actual claims yet, but I fully expect that to change as time goes on. When you're doing, over 30% of the protection you write is income protection, there'll be a point where those policies will start getting used and I can say with confidence I know I've put those people in the right place to look after them, depending on who they are and what they do and what they need from their cover.

Speaker 2:

I think you touched on a really important point for the advisors listening. There will be situations when you do sourcing for a specific occupation and the friendlies will feature and you'll almost think something's wrong or there's a mistake because the price differential will be so big. You'll think something's not right, and I think that was a really important one. I'm so glad you raised it, because this was a very, very real experience of mine when I was an advisor. It was only when I realized that you're absolutely right. Their pricing models are built around this idea that we have a typical ideal customer that we know how to work with, that we like to send our books, it sits within our risk infrastructure, we're quite happy with it and I think that's when they price accordingly because they want to win business. That's when they price accordingly because they want to win business. Ok, so on the flip side then, what do you think is probably less advantageous about using a friendly in certain situations and what? What might those situations be?

Speaker 3:

So, yes, so the disadvantages might be that things will take a bit longer. So it might take a little bit longer in terms of your application process. It might take a little bit longer in terms of the underwriting. In terms of your application process, it might take a little bit longer in terms of the underwriting You're probably not going to be going to straight away to. I buy it now that you might get on underwrite me for somebody who's you filled all the boxes in for, but it's worth that little bit of weight and that little bit of time to take to make sure that it's done right.

Speaker 2:

There was a client I had years ago and I ended up making a recommendation to them because they were in a manual profession, used to fit like air ducts and refrigerator systems and air conditioning systems at offices, and I produced a presentation. I said to him, I said, right, I'm actually going to recommend a firm you've probably never heard of them. It's called Sirencester Friendly. Right, he turns around and goes. I want to know them. I do all the work at their offices. It's like the irony of that particular situation. But yeah, that was an easy option because of course, he went into the organization, he saw what the people like and he saw how, how friendly literally yeah and personal they were. So, yeah, I think this has been a really interesting conversation and I'm so glad we've had you on. Like I said, I knew you were going to be brilliant on it. So just quickly before you leave, nicola, can you just tell everyone listening or watching the podcast where they can find you on social media?

Speaker 3:

So mainly my storytelling videos. You'll find me on Instagram and it is just at Nicola Huxley. I do post on LinkedIn, but videos don't go on there. But yeah, and I have also got a podcast which is called Survive and Thrive, where I kind of help share the stories of real people and how they've coped with illness and how they're thriving afterwards, which is a bit of a passion project. It sounds really weird but it's a thing for me that promoting this industry is about the real people and the real people you help along the way. And if I can help promote a story that then helps people want to take cover, then that's exactly what I'm here to do it doesn't sound weird at all.

Speaker 2:

It sounds brilliant. I actually have listened to a couple of the episodes and I see them promoted on Instagram and I just think they're wonderful because what they do is they really bring this concept of protection and the difference it makes people's lives alive, and I think I'd well encourage anyone listening to go and check that out. So head to Instagram, go and check out. Nicola Huxley, I can't thank you enough for coming on today. It's been really insightful, really helpful and I'm sure that everyone listening will be able to take loads away from it. So thank you for coming on, nicola no, thank you for having me wow, that was incredibly insightful, matt.

Speaker 1:

I think our any advisor listening now is going to have a really clear picture on what a mutuals and friendlies can offer potential clients.

Speaker 2:

Yeah, no, absolutely Stevie. I think it's great to hear from an advisor who has access to those friendly societies and the mutuals and explaining how she goes through her advice process to identify when it might be a more appropriate solution for their customers. And I think the key to this one is just not discounting them right. It's not to just gloss over them or look past them. You know, if you've got access to these products, they could be incredibly beneficial for your customer and could actually make your job that much easier while still producing a better outcome for your customers.

Speaker 1:

Okay, now let's hear from one of these friendly societies themselves, and we are speaking to Andrew Morris, the CEO of Sirencester Friendly Society. Now I do want to mention that Sirencester Friendly were part of the seven claims story that was out last month, so if you've not watched it yet, please do go check it out. But for now, let's chat to andrew andy. Thank you very much for joining us on today's podcast. We're really honored to have you here. Um, first of all, I wanted to ask a little bit about the histories of mutuals and friendlies. I believe it stretches quite far back.

Speaker 4:

Yes, absolutely. Thank you very much, stevie, for the invitation. It's great to be with everybody here today. Mutuals absolutely have an intriguing history, largely born out of the cooperative movement of Victorian society. So, speaking about Sire Ancestor Friendly, we date back 135 years as a friendly. Others have an even longer history, so it's really rich and ingrained within UK society. Clearly a lot has changed in that time, but what also remains from that period of history is the sense of social purpose. So I think that values-based approach to how to run an organisation and how to treat your members still is as true today as it ever was.

Speaker 1:

And I believe, wasn't it Mutuals and Friendlies who provided the first income protection policy? Is that true?

Speaker 4:

Absolutely the way to think about a friendly society is. A friendly society is to insurance, like a building society is to the world of housing, mortgages and banking. So, absolutely, it was born out of that need to say what happens when a particular person who doesn't have the means to sustain themselves, but in particular their family, when times are tough and they get sick. So in the case of Cirencester, that was agricultural workers. So if you worked, you got paid. If you didn't work, you were in trouble. So therefore, people got together as a sort of collaboration of like-minded individuals to protect each other and each other's families. So when times got tough, others would help you out.

Speaker 1:

So this all sounds very nice, as you say, very friendly, almost very socialist in its morals, which you know personally, I you know. I think this helping each other and making sure we're protected is a great idea, and obviously Labour agree with this, and they want to double the size of mutuals and friendlies during their term. But, andy, what does this actually mean, doubling the size? What are they pushing for and why are they targeting mutuals and friendlies?

Speaker 4:

Yes, it's a very relevant topic at the moment. The Labour government has absolutely thrown its weight behind the mutual model in various aspects of society, and financial services is part of that. I think the doubling is a catchy headline, so it's a way of getting people's attention and also focusing minds on growth. No doubt everyone will have heard about how growth is a key part of driving the economy forward and from Labour's point of view, that's also therefore paying for the services. The aspiration, therefore, is to make sure that all aspects of the economy grow, and the mutuals were at the heart actually of the labour movement, to your point around socialism Not so much of a trendy word anymore, but that's absolutely the roots of it. But you move on. You know a lot of our organisations are not politically aligned anymore.

Speaker 4:

However, the principle of helping people who need it, particularly serving the underserved, looking at different ways that mutuals can help people who perhaps don't have as ready access to financial products, all of these things can be captured up in that concept of doubling. So they are deliberately vague in the sense of is it doubling assets? Is it doubling members? Is it doubling the economy? These aspects of mutuals, it could be any of those things when I come from, I think, and in linking it to the Association of Financial Mutuals and how, as a trade body that lobbies. Then, looking at that labour commitment, we want to make the most of that opportunity and invest in growth, just like other organisations do, and I think the mutuals are well placed to do that because it's true to the labour roots. Is it doubling size of assets, members, etc. In a sense, that's less important than the idea of investing for growth and reaching people who perhaps don't have protection, as well as providing good protection products for all advisors to sell for our communities as well.

Speaker 1:

So I mean that moves on very nicely to my next question, which is around why are mutuals different and what can they offer over other providers out there in the market and what can they offer over other providers out there in the market?

Speaker 4:

Absolutely, we are different, the owned by your members being the key definition of what a mutual is. That is different to being owned by your shareholders. In that sense, what are we there for? We're there to look after our members and to protect them, as opposed to pay dividends to our shareholders. So, in that sense, one of the phrases I like is as an organisation, we exist to pay claims.

Speaker 4:

A shareholder, an organisation, can't say that, and that comes through in our culture in the sense that the values and the sense of social purpose that I talked about earlier runs through how we behave, and it's at the heart of what all of the people in the organisation strive for. That said, we are quite like the other organisations as well. You know this is not a charity. You know we are in the business of making money. We are in the business of making profit because that's how you sustain the business for the long term, but it means that we have a sort of safe and stable approach to finances.

Speaker 4:

We take an investment with a long term view, because it's all about being there for the members, and income protection contracts, as everybody well knows, can run into decades. So what matters to the member is that in the decades to come. You still exist and you still have the resources to pay their claim when the need arises, so you need to be there for them for the long term. At Cirencester, what does that look like? We particularly try to strive for exemplary service, so service is a core part of our proposition to make sure that we do our very best for our members when the claims are in and when they really need us, as well as offering the very best service for advisors so that they can sell our product and understand what it is we're about and what it is we can offer.

Speaker 1:

So, yeah, it's clear the members are at the heart of it and Matt and I spoke, you know earlier in the episode how that does shape how the company sort of acts, because he said it's not for the shareholders, it's for the members. For the members it's very, very key. But thinking about that membership ownership, how can mutuals innovate while staying true to this core principles of member ownership and customer first values?

Speaker 4:

innovation is key and in this sense, we are the same as other organizations where you absolutely need to be relevant to the needs of your members and future members, customers.

Speaker 4:

So, in that context, innovation is just as important, because you need to stay relevant. I think it's easy to perhaps be complacent in the sense of looking after and doing the same as you've always done for 135 years, but in reality, the needs are different the need to be digital, the need to be available and the need to process things quickly. In that sense, all of those things are true to all of the organizations who are trying to look after customers, and those that don't innovate, those that don't remain relevant to the modern consumer, will fall behind. So, in that sense, a phrase that is often used is the modern mutual, and in that sense, it's about meeting needs in the best ways that you can. So I think innovation whether that is the adoption of technology in all of its forms always important, but done with the view of maintaining excellent service. So I think that is a key differentiator If you provide good service to your members, they're going to keep coming back. If you provide good service to advisors, they're going to come back and want to use you.

Speaker 1:

So they have value for the members. You're thinking about the innovation for the future, but what about the approach to underwriting? Is it different compared to, say, mainstream insurers?

Speaker 4:

I can speak for Sirencester in that context. So our model is we do our own underwriting in the same way that we do our own claims, so in that sense it's in-house. To be fair, that makes it a more expensive business model as a consequence. Why do we do that? It enables us to serve some of the people who are not served by other financial institutions. One little catchphrase that would go with that is when the big boys say no, we say maybe.

Speaker 4:

That approach to underwriting, where you're doing it on a case-by-case basis, means that you can look after people, for example, who have pre-existing medical conditions. You can look after people who have irregular income streams. Maybe they are sort of set up their own business, so they're self-employed or they're the director of a small company these type of individuals where the case is, by definition, more complicated. If you have an automated process which says put it through the engine. If it comes out the other side, happy days. If it doesn't, you say no because you're all about efficiency and scale, there's absolutely a place for that. Where we come in is to say well, how about those people who aren't well served by that model? We would absolutely want to be competitive with all parts of the market and we endeavour to be so of the market and we endeavour to be so. But by definition that is a bit more expensive as an approach, but we can look after people who perhaps don't get represented by other organisations.

Speaker 1:

So, moving back to this Labour pledge, what are the biggest challenges and the opportunities that you see moving forward now, especially as there seems to be a government backing? So what do you see as the biggest challenges and the biggest opportunities?

Speaker 4:

Absolutely. The approach of the government pervades through then into regulation as well and into the wider market. So I'm lucky enough to sit as vice chair of the Association of Financial Mutuals, which is the trade body for the mutuals, for the friendlies, as well as cash plans and indeed long-term savers. So there's that real opportunity to engage with government and engage with regulators and say, well, what is it that we can do to sort of unlock some of that growth potential? So what does the future hold?

Speaker 4:

These opportunities don't come along very often and, to be blunt, we didn't get a lot of attention in terms of some of the areas we want to focus on in the past.

Speaker 4:

Now that we are getting that attention, I think it's beholden on us to make the most of that opportunity and to really capitalise on it. So some of that is all of the commercial business growth that we would look to do anyway, but some of it is also saying, well, what will unlock the potential? Because of the legislative regime that Friendly is operating and I'll try not to get too tedious in terms of talking about law or regulation but one of the things we can't do is go to the markets and borrow money. You know we're prevented from doing that. So in that dialogue with government, in that dialogue with regulators, where we can unlock some of those things, that gives us more potential to grow. So if we could access capital in a better way, we can put that capital to the investment of growing the society at a quicker pace and that would also then enable us to serve more members into the future. So I think it's a really good opportunity to grow the whole sector.

Speaker 1:

And if you did have a crystal ball or a carte blanche to make one policy change to improve the landscape for mutuals, what would it be, Andy, and why it would be?

Speaker 4:

that Friendly Societies Act of 1992, which is very outdated, and to bring that up to the Companies Act, which is what our competitors in PLC world they all operate under that. So it's bringing the legislation up to date and we're absolutely working through the AFM and other trade bodies. We are working to have the law updated within the lifetime of this Parliament. So we're absolutely on that and that would absolutely increase our opportunities to grow and make a level playing field with other peers that are in that market and it would mean that the mutual organisations can perhaps get back to the position that they have been in the past.

Speaker 4:

It's not that long ago, if I was to go back to sort of 70s and 80s, that mutuals actually made up 50 percent of financial services in the UK.

Speaker 4:

Mutuals actually made up 50% of financial services in the UK. And if you look across and we work with IGMIF, the international organisation as well, which I know IPTF talk to so in that context you look at France, the Netherlands 50% of their financial services are managed by Mutuals. That said, I think the best way I think about it is we're not looking to sort of fight over other people's lunch. I think this is more about how do we grow the protection sector for the whole of the UK because it is underserved, it is undersold. So, rather than thinking about outright competition, nothing wrong with that but it's about how do we grow protection across the UK and get to those people who currently don't have any form of financial protection. There's a real need there and I think mutuals are particularly well placed to tap into that need and to make more of that opportunity. So, absolutely, that's also where we look to develop the products, develop the markets and help the government achieve that objective as well.

Speaker 1:

As we like to say at the IPTF, it takes a village, andy. So you know, we need we need different types of organisations for different needs and different types of advisors to to be able to make sure that we get everyone protected in some way. Andy, thank you so much. I've just got one final question. I want to throw at you a little curveball here. From my, let's say, education into mutuals and friendlies, I see them as quite a positive thing in the world. You know, we're often used to seeing negative headlines of shareholders getting the share of the spoils. So, actually hearing about that, there are insurance companies that are owned by their members. For me personally, I was very excited about it. But I wanted to ask you, andy, as CEO of Sester Friendlies, how does the industry make you feel? And obviously you must enjoy this role and have been doing so for a long, long time.

Speaker 4:

Absolutely. I love the mutual sector. It's a pleasure to go to work because you're surrounded by people who also committed and have that sense of purpose, so there's a real alignment of values. So, to your point, totally agree. You know, I really enjoy it and I love what mutuals have to offer, and it's been my experience that those who know about mutuals also learn to love mutuals as well and what they have to offer. It's a big market. There's a place for all of these different business models, as you've stated. I think the challenge for mutuals is those who know us love us, but a lot of people don't know us, so how do you get the message out there? I think that is a challenge. It's one that we actively try and pursue, and part of the benefit of this conversation is indeed that we can get that message out there that there is an alternative way of doing business and for certain people and for certain advisors, as you've stated, it absolutely meets a need alongside other organizations as well andy, thank you, uh, there we go, advisors.

Speaker 1:

There are other mutuals and friendlies available, but do reach out to mutuals and friendlies if you'd like to know more, so that we can get more people protected. Andy, thank you very much for your time. It's been a pleasure chatting to you and, uh, yeah, we'll speak again soon. Thank you very much for your time. It's been a pleasure chatting to you and, yeah, we'll speak again soon, hopefully. Thank you very much for the opportunity, steve.

Speaker 4:

Always a pleasure.

Speaker 1:

Thanks again, andrew, for your time there. So now it's time for your questions, and this month we have a few uh, anonymous questions by email. Just a reminder if you want to feature on future episodes, go to speakpipecom forward slash let's talk ip podcast to send us your voice notes. We would love to get some more voice notes in. Please do send them across. If you've got burning questions or you would love just Matt's advice on something, please do send us a voice note. We can get you answered and featured on the show, or you can email us at info at iptfcouk.

Speaker 2:

Yeah, it's really important because actually there's probably people out there thinking just the same as you, or they have the same burning question as you, and it only takes one person to send that question in and we can really help a lot of you to overcome some of the barriers that are stopping you writing more income protection business I couldn't agree more, matt.

Speaker 1:

And speaking of shout outs, I wanted to give a big shout out to top dog ron, who gave us a five-star review on Apple podcast, saying excellent starts in a new series, so informative and relatable. So thank you very, very, very much, top dog Rog. I think that's mostly on you, matt and our excellent guests, but I'll still take it, thank you.

Speaker 2:

We always really appreciate the feedback. It lets us know whether we're doing a decent job or whether we need to make improvements. But no, I'm really glad that you're enjoying the show and appreciate the feedback.

Speaker 1:

It all helps these reviews and ratings. So if you do have two seconds, 10 seconds, if you are enjoying the show, please do leave us a review. It does help us move up in the charts and push our net wider, net wider. Let's say so. Here are the questions. Matt how do mutual societies reinvest their profits to benefit their members?

Speaker 2:

That's a really good question. I mean we kind of briefly mentioned it in the conversation I had with Nicola where we were saying I mean I do remember this personally myself, where I had experiences of both, you know, cost savings being passed on to the policyholders, so the consumers themselves. So it meant that they could enjoy savings on the premiums that they're paying, which is, I mean, who doesn't want to be told their premiums are going down? Right, it's a great one on. And secondly, you know it can be reinvested in either improving the services, the quality of the products.

Speaker 2:

You know these are fairly nimble businesses. So often when they are reinvesting their profits, they're being put to use very wisely for the benefit of the members, and I think that's a great selling point. You know, investing in a solution where it's not just about having the policy. Of course you've got the core benefit, but naturally we know that any kind of profits that's being generated by the organization is being revested, or divested, I should say, into benefits, solutions, additional policy benefits, great services, improvements in underwriting or even potentially, like I say, some of the savings or profits going back to the policyholders or members themselves okay, great thanks, matt.

Speaker 1:

So here's the second question do mutual societies take a more flexible or personalized approach to assessing claims, and they this person said I'm thinking for clients with pre-existing conditions?

Speaker 2:

yeah, absolutely. I mean I I think it was pretty evident in the conversation we had with nicola because she explained about the examples that she got, those particular case studies where she's seen a more flexible approach. Now, naturally what it means is there's slightly more comprehensive underwriting done at the initial stage, so at point of sale. But what you then find is probably that will lead to a much better outcome when it comes to assessing a claim. Now, naturally they probably take a more personalized approach to claims. Just given the size and scale of the organizations, you're typically going to have the same person managing that all the way through. And that's not to say that the big organizations don't do a good job. But naturally, just given the size and scale of the organization, the reputational risk as well, I think you'll find they'll probably have a more in-depth claims process. And we see that, like you were talking about the seven claims example that we've got with CERN, sister friendly, where it shows what that claims process looks like within a mutual environment and how different it can be. So I'll give you a prime example of what I mean.

Speaker 2:

And there was a situation I had with an individual that had a problem and I think it was a pre-existing condition. I'll have to go back and check my books, but if I remember correctly, this was something where there wasn't the validity to have a full claim. That is to say that, you know, when we issued the claim, I think because it was a pre-existing condition, the insurance provider had no legitimacy in terms of paying the claim. Because it was a pre-existing condition, like I said, any mainstream provider would have rejected it. But the franchise we're working with actually made a fiscal contribution to the individual to get an ergonomic desk, which would hopefully reduce the issue to do with that sort of repetitive strain injury. So, ok, appreciate it wasn't a full claim payment, but there was a far more personalised approach to the issue and they were still attempting to support the customer, mainly because they were thinking the positives of not potentially this escalating to something more serious or even potentially the customer cancelling their contract.

Speaker 1:

OK, great, and final question, matt. Great, and a final question, matt. What kind of financial stability do these societies have to ensure long-term claims payouts?

Speaker 2:

that is a really good question because I think, thinking back to the interview I had with with nicola a minute ago, we were saying that maybe one of the key reasons why advisors don't always place with mutuals or friendlies is because when they see them and they don't see the big brands that they're used to seeing on TV and these big, large corporations perhaps there's a fear that maybe they're underfunded or maybe they don't have the same level of financial stability as one of these larger mainstream insurers. But nothing could be further from the truth, because these are small, agile organisations often, in many cases I mean, look at Royal London and LV, both also mutual. So we can't use the argument they're not big and fiscally stable. But there's one thing that's really important to remember here Many of these firms have been around for hundreds of years.

Speaker 2:

You know, many of these organizations were at the founding point, when disability insurance even became a thing. These are longstanding businesses that have a history of doing the right thing. They're well managed, they're well funded and naturally they spend more care and attention on their fiscal stability than most of the bigger organizations. It's worth noting and it's really important to remember this. None of these organizations could operate without having that level of financial stability, because they're subject to regulation of the prudential regulation, so naturally they're all going to be fiscally stable. So I would say, if advisors are concerned about placing business with them because they're concerned about financial stability, don't be.

Speaker 1:

Okay, thank you, matt. That is some excellent answers to these anonymous questions we've had in, and let's now move on to those actual takeaways, matt. So let's now move on to those actual takeaways, matt, that key advice tailored to those different levels of expertise, and then, after that, matt give us a little conclusion, wrap this all up for us so we can be on a merry way.

Speaker 2:

Of course, brilliant. Well, let's get cracking then, shall we? Let's look at some actionable tips. We're going to start with the beginner or less experienced advisors. I think my top tip for you guys would be to start by educating yourself. First and foremost, understand what makes mutual insurers different and the benefits it can offer to your clients. So think about this for a minute. Mutual providers are owned by their members, the policyholders, not shareholders, meaning that those profits are then often reinvested for better customer benefits. Many mutuals offer additional value through member benefits, such as access to support services, enhanced claims experience and even discretionary payouts, which I mentioned previously. When discussing those options with your clients, just highlight how mutual insurers focus on that long-term stability rather than immediate shareholder profits, which can then lead to a more customer-centric conversation and approach. So how to actually apply that? If you're an inexperienced advisor, here's some tips on actually applying that day-to-day.

Speaker 2:

Build your own confidence by researching a few key mutual providers and their standout benefits. Get the BDMs in talk to you about how it works, why they're so beneficial, the key things they can offer your customers, so that you've got that degree of knowledge and security, but also, most importantly, what type of customer they'll take on that. Maybe some of the others wouldn't, so that you've got a route to go down when you come across those types of customers. Make sure you use simple language when explaining mutuals to clients. Frame them as insurance providers that put members first. Compare, maybe a traditional insurance provider's approach versus a mutual to illustrate the key difference so that your customers can make more informed choices. Now, moving on to the intermediate advisors, let's look at how we position mutuals as a strong alternative to maybe some of the more well-known traditional brands that you work with. Here's a top tip for you Use mutual providers to offer clients a solution that prioritizes long-term value and sustainability. Some key facts for you. Mutuals often have a history of fairer underwriting for clients in niche occupations or with health concerns, just like Stevie asked me earlier. They typically have more flexibility in their approach to claims and sometimes offer discretionary benefits beyond those contractual terms, like I mentioned about that desk, and in some cases they provide profit sharing benefits, reduce premiums over time or even enhance services, making them appealing for certain client profiles. So it's all about the client that's sat in front of you and why a mutual might be a better option. So how do you apply this if you're a more experienced advisor. Well, when discussing protection with clients, include mutuals as an option just as part of your recommendations.

Speaker 2:

Don't just always default to big name insurers. Don't just wrap it up in a menu plan. Use those case studies from your providers or from your colleagues to demonstrate whether mutuals have potentially outperformed a traditional insurance provider in both claims and service. When you're dealing with that type of occupational client need, be proactive in reviewing and comparing policies. Sometimes a mutual provider may be a better fit for a client with unique needs. In particular, think about things like age, cost of insurance for those who are starting out on a inverted commas budget. Now let's dig into what we can do for those experienced advisors those who already know what they're doing but maybe just need a little bit of support around this area and how we leverage mutuals for that long-term client engagement and continued business growth. Here's a top tip for you Strategically position your mutual insurance options as part of a broader customer retention and referral strategy.

Speaker 2:

So let's look at some facts. Mutuals focus on those member benefits above all else, and that allows you to build stronger client relationships and increase your retention through those ongoing value-added services and potential future benefits. Their approach is naturally fairer when it comes to underwriting, and those discretionary claims decisions can lead to better outcomes, which then strengthens your trust with the client. And don't forget by aligning your advice process with Mutual's customer-first ethos, you can differentiate yourself from those competitors that focus solely on price and demonstrate a greater level of care and attention for your customers. So how do you actually apply this? If you're an experienced advisor, how would you actually apply that? Well, look, use your client success stories for mutuals to actually showcase your expertise and reinforce the value of quality over price-led decisions. If your client base includes business owners or high net worth individuals, explore how those mutual insurers with added benefits, such as profit sharing, for example, could enhance their long-term financial security and provide greater benefits down the line. Make sure you build partnerships with your mutual providers to deepen your expertise and unlock those opportunities such as exclusive advisor training, co-branded marketing, potentially, or even speaking opportunities at industry events to show your collaboration.

Speaker 2:

So just to summarize and I suppose to bring this episode to a conclusion, all I would say is don't discount those mutual opportunities. It's very easy to focus on what you know. It's very easy to take the path of least resistance. It's very easy to default to traditional providers, who you know well, who have large, big name brands that you're familiar with. But don't ever discount those mutual options because they could be the right thing for your customer, particularly when you're dealing in manual professions, those with pre-existing conditions. Just take the time to get to know them better because you might be finding a perfect solution for your customer, that perfect marriage between cost and risk and the opportunity for you to get cover where maybe it wasn't possible before. So see mutuals as a great part of your financial toolkit, the advice options you can give your customers, and just don't be afraid to move out of those menu-based options and look, particularly when it comes to income protection, at Mutuals as a perfect alternative.

Speaker 1:

Amazing, matt. Thank you so much. Okay, that is it for this month's let's Talk Income Protection. Please do rate and review us if you can on Apple Podcasts. It really helps the show out. And share the podcast with your colleagues and spread the word if you're enjoying it. This month, the iptf will be providing content focused on yes, you've guessed it mutuals and friendlies. So if you're not following the iptf on linkedin, instagram or youtube, do that now. All links are in the podcast description. And finally, do remember to claim your unstructured cpt points for the episode. And if you are not subscribed, why not do so now on your favorite podcast platform of choice? Let's talk income protection is produced by c studios. I've been stevie on oldie and I've been Matt Chapman, and we'll see you next month for more let's Talk Income Protection.