How farmers, military personnel and police officers get better insurance deals

Could you be eligible for cheaper financial products through so-called ‘blue light’ mutuals?

Marching to a mutual: are armed forces insurance deals better than the rest of ours? (Getty)

If you’re not happy with your insurance premiums then it probably wouldn’t occur to you to see if a mutual launched by a retired general could help you out.

But it’s very possible that it could – the Military Mutual is open not only to those in the armed forces but also their families, including the children and even grandchildren of those who are serving or have served.

Since so many have people relatives who have worked for the armed forces or the Ministry of Defence – particularly with the legacy of conscription – The Military Mutual estimates around 20 million are eligible to apply for its insurance products.

But while it is open to a wide group, its products are aimed chiefly at military personnel. These are designed to be more useful to those who are serving, with claim decisions designed to be more understanding of the rigours of service and the challenges faced by people who frequently move, carry expensive kit and spend many months out of the country at a time.

What’s more, the directors of the mutual have the power to agree claims that are not technically covered if they believe the circumstances justify them doing so. That will be reassuring for serving personnel who risk damaging their belongings while under fire abroad as well as in their day-to-day lives.

It’s the brainchild of Sir Sebastian Roberts, a retired major-general who wanted to form a mutual that provided proper support to those working in or for the armed forces.

“For too long, members of the ‘military family’ have been a square peg in a round hole when it comes to financial services,” says Sir Sebastian. “Many, especially those serving or moving into civvy street, have needs different to the average consumer and the mainstream financial services community has never really woken up to this.

“Those that have served their country, or are transitioning into civilian life deserve better – better value based on better values.”

Those better values might be attractive to the wider community. Any profits generated by the mutual are ploughed into providing support for those in the services, for example legal support for serving personnel who face court martial and cannot afford to pay for a lawyer themselves.

So for the more general public who don’t need its specialist help it’s a way of finding an insurance policy and also supporting troops.

Most mutuals now offer a far more general service; for example, Royal London, Liverpool Victoria and the National Farmers’ Union. Yet some still serve specific communities.

“Almost all mutuals now serve all of the general public,” says Robert Wharton, a corporate, commercial solicitor at Keystone Law. “Some like the Police Mutual, Transport Friendly, Railway Enginemen’s and others still serve their traditional market as that can be an easier route to market and provide support to groups who are often not well served.”

There are even building societies solely serving those in the teaching profession and specific geographical communities.

Of course, even while most mutuals serve most people, it is always true that some members of the public are excluded from these and other more mainstream providers thanks to a lack of stable accommodation or a poor credit score.

For those people, a credit union might provide a better chance of being accepted for a much-needed financial product. These small, non-profit financial organisations typically serve a specific community, sometimes a local community, sometimes people from a specific industry. (You can search for a suitable credit union online.)

Safe and sound?

However, some potential customers might wonder if it is safe to use a small mutual for their savings, insurance or other financial products. Mutuals such as the National Farmers’ Union are enormous, with many years of experience.

But can you really trust someone to manage your money if their expertise is from a totally different field?

Keystone Law’s Wharton is reassuring that every financial organisation is subject to strict rules and governance. He says: “Mutuals are regulated in the same way as PLC insurers, and subject to the same requirements for capital management and governance. They may not aspire to make a large profit, as they have no shareholders to answer to, but they are financially robust.

“They are very far from charities and are substantial and specialist providers of insurance policies which mainstream providers do not have the flexibility to provide.”

Virtuous competition

But what are the benefits of going with a mutual, large or small, for a customer who is not within a targeted community?

“Mutuals offer an alternative to PLC insurers,” says Wharton. “They have the best interests of customers at heart and, whilst you would expect PLC insurers to do that too, for mutuals there is no conflict of interest between customers and shareholders.

“During the financial crisis in 2008/09, mutuals continued to operate in markets many PLCs considered unprofitable, and as a result in the five years from 2009, mutuals grew premium income by over 40 per cent while the remainder of the insurance sector shrunk by 11 per cent.”

He adds: “Mutuals therefore encourage virtuous competition in the interests of customers, and today around 30 million people in the UK and Ireland have a policy with a mutual.”

Despite that, some potential customers will no doubt question whether they would be better simply going with a more mainstream insurance provider. Yet Paul Koronka, chief executive of The Military Mutual, says that its existing customers are highly satisfied.

“The proof of the pudding is in the eating,” he says. “Our members are obviously attracted by the concept of mutuality and the benefits that brings.”