The UK needs a good mix of mutual organisations to service customers - it cannot always be about the money

By Content Director Saxon East


Saxon East

The customer rarely gets a say when a company is taken over. They are right at the bottom of the stakeholder priority list. 

But mutuals are different. The customer is, in effect, the shareholder.

Which is why when private equity house Bain Capital offered to take over LV=, policyholders were given a vote. They rejected the bid this week.

This is good news for the customer and society at large. 

Having already lost the general insurance business to insurer Allianz, a publicly-listed company, the remaining life insurance, investments and savings arm was recommended by the board to be sold off to Bain Capital. 

The rejection of the deal by policyholders now means that LV= may end up merging with Royal London, another mutual, something which would likely be a far more attractive option for policyholders. 

Mutual benefits

 All the evidence points to mutuals being better at serving customers. 

NFU Mutual is an outstanding insurer, which always tops customer satisfaction surveys. Under the mutual structure, LV= has consistently topped customer research satisfaction surveys.

Mutuals can take a long-term view on what is best for the customer, compared to quoted insurers that are more short term.

Under pressure, these businesses will aggressively strip out costs to meet profit and dividend targets. Private equity can also be aggressive on cost reduction. 

For example, the publicly-listed insurer RSA expanded too quickly, without the proper checks and balances, and then cut back aggressively.

It saved itself, but at the cost of broker service - it has consistently been at the bottom of our service rankings for several years.

This is not to say all listed insurers or private equity firms are bad. Of course not.

There are numerous examples of good customer service from floated insurers and private equity-owned carriers. 

For example, Esure is improving following the investment from Bain Capital, the same company which targeted LV=.

What cannot be denied though is that it is healthy for society to have firms that have different structures and stakeholder priorities. 

Let’s hope LV= finds a home that keeps everyone happy.