Although it’s impossible to undo the failures of history, there is hope for the future of financial services with a modern-day adaption of the mutual life insurance model to restore much-needed certainty, trust and confidence to the insurance sector, writes Barry Daniels.
For nearly 150 years the financial services industry in Australia prospered immensely from the life insurance mutual companies until the 1990s when the industry lost its sense of purpose and abandoned long-held conservative principles. Under the direction of a new breed of managers, the industry went on a frenzy devouring itself with one household brand after another lost in a steady stream of amalgamation and buy-outs that saw one group after another disappear.
To compound the dilemma, the situation has worsened since 2001 with the introduction of FSR and ongoing government intervention seeking to improve the performance of the financial sector.
As a consequence of the federal government’s efforts to bring about change and restore confidence, the number of financial advisers has plummeted whilst simultaneously increasing the cost of providing professional advice for consumers.
In hindsight the post mutual era has been a disaster and with major banks announcing they are jettisoning their wealth / insurance arms and many like the AMP restructuring and downsizing their adviser networks.
Industry and consumers are justified in asking what exactly has been the benefit of industry vertical amalgamation and government intervention?
In my recently released white paper ‘Australian Financial Services – an industry that has lost its focus & sense purpose’ I affirm that the re-emergence of the mutual insurance model in Australia is the answer to the industry’s future viability.
For mutual companies to succeed they need to be aligned with the best interests of their policyholder members. What’s more, mutual companies are owned by their policyholders, not shareholders – and that’s a very important and crucial distinction.
Mutual companies share their profits with policyholder members, look after their interests and needs first and develop products and services accordingly. This differs from the current bank owned model that sells and markets products to generate profits / dividends for their shareholders without necessarily benefiting policyholders.
Barry J Daniels is a former financial planner Founder of PFM Australia Pty Ltd & Alliton Capital Pty Ltd