NACFB Mutual

At its heart, insurance is a very mutual concept: a group of individuals or entities with a shared opportunity or problem joining together to provide an effective and cost-efficient solution. That was how the sector first become established, and little more than 20 years ago, the majority of the UK insurance sector was still mutual.
Today, mutuals account for around ten per cent of premium income in the UK insurance industry, though this itself marks a recovery from the period immediately before the financial crisis in 2008. During that 20-year period we have seen mergers that have reduced the number of active mutual insurers below a hundred, with significant barriers to entry preventing the development of new traditional mutuals.
The solution to that has been the widening development of the discretionary and hybrid discretionary mutuals.

The NACFB Mutual is managed by Tower Insurance Brokers Limited who are based in Lytham St Annes. Tower are an established Insurance and Risk Management Consultancy offering a variety of Broker services to businesses and individuals across the UK and beyond.

A mutual is an organisation whose members pool risks of a similar nature to achieve a long-term, stable alternative to insurance. Mutuality is a growing sector within the insurance world and is particularly appealing to industries that have suffered in the past from the recurring cyclical nature of the standard insurance market. Mutuals; being run by the members; tend to understand the exposures of their members better than general insurers.

A vital component of a mutual is that claims are paid at the discretion of the Board. That means that the payment of claims is not contractually guaranteed, but within a mutual organisation, owned by its members a claimant can expect a sympathetic response. Indeed, as the underwriting and claims handling process is not as narrowly defined as to whether a claim meets the contractual obligations, fairness may play a greater part.

In assessing any claim, the mutual being owned by its customers presents no conflict of interest, as the organisation’s sole purpose is to serve its members.
As well as being less costly to run than a shareholder-owned insurance company, a prominent feature of many mutuals is that the contributions paid by members create a pool of member funds which exceeds the claims and expenses. This surplus may, at the discretion of the Board and under the direction of the members, be used to reduce or rebate contributions, invest in new products and services, or to support a short-term adverse claims experience.

NO. The NACFB Mutual is a Hybrid Discretionary Mutual that combines pooled mutual protection with insurance to efficiently protect NACFB members for their Professional Indemnity problems.

• A mutual is owned by its members, whereas an insurance company is owned by its shareholders, which means –
  1. members choose the board of directors, and they get a say in the management of the mutual.
  2. the mutual is run by its members for its members, not for the benefit of shareholders.
  3. Members get to share in the trading surplus of the mutual
• A mutual deals directly with its members rather than via brokers, thus avoiding broker commissions.
• Mutuals have certain tax advantages over conventional insurance companies that can benefit its members.

NO. The NACFB Mutual is a Hybrid Discretionary Mutual that combines pooled mutual protection with insurance to efficiently protect NACFB members for their Professional Indemnity problems.

1. Brokers act in the interests of their shareholders, mutuals exist solely for the benefit of their members.
2. Brokers are remunerated by commission and fees, which may be specific to an individual client, but can also earn other non-disclosed remunerations from the insurers with whom they place business. All the financial arrangements whereby the mutual is remunerated are transparent.
3. Brokers have less interest in risk management and claims experience as oftentimes their remuneration increases as premiums go up. Mutuals are committed to bringing down the total cost of risk.

YES. Whether the business conducted by a member or prospective member of the NACFB Mutual is regulated, non-regulated, or a combination of both is of no significance. We treat all members equally and make no service distinction between regulated or non-regulated activities. The NACFB Mutual is itself regulated by the FCA as an Appointed Representative of the Mutual Managers.

YES. Subject to the constraints usual in any market, and the need to buy insurance to protect the mutual and its members, the NACFB mutual is free to set its prices according to the guiding principle of what is best for the wider membership.

YES. The NACFB Mutual is regulated by the FCA as an Appointed Representative of the Mutual Managers

YES. but there are some activities that the NACFB mutual chooses not to cover as standard. The NACFB mutual, in consideration of its wider duty to act in the best interests of the entire membership, exercises due caution when underwriting certain residential finance and credit activities. Details of these are found on our proposal form. We also choose not to cover complex Structured Asset Finance arrangements.

YES. Our Head of Underwriting regularly calls to discuss areas of concern with  members or prospects including, but not limited to-

1. Whether certain activities are or can be covered.
2. How the mutual model works.

NO. The NACFB Mutual is a Hybrid Discretionary mutual that blends discretionary cover with conventional insurance for the best interests of its members. The discretionary element of the cover is determined by the Cover Wording, but viewed through the filter of what is best for the member not the shareholders of the insurance broker, MGA, or insurance company. Not only does this mean that all claims that fall within the strict terms of the Cover Wording will be viewed favorably, but also those that are technically excluded can be considered for settlement if this were what the wider membership would deem fair under the circumstances.