3 reasons why advisers should look to mutuals for growth and retention

Amid this volatility however, mutual companies – those owned by their customers or policyholders rather than shareholders – have consistently outperformed, particularly in the risk insurance industry.

During the Global Financial Crisis, mutual life insurers saw a 23 per cent growth rate, compared to just 7 per cent for the broader industry, according to the International Cooperative and Mutual Insurance Federation (ICMIF). Even amid the challenges of COVID-19, while global life insurance premiums dropped by 1.5 per cent, mutual insurers experienced a 1.5 per cent increase (Source: ICMIF).

This growing presence reveals a simple truth: the mutual business model performs well, even amid times of crisis. So, what’s the secret behind the success of this approach, and what lessons can be applied to risk advice?

Why mutuals outperform in risk advice

As member-owned entities, mutuals’ goals align with their members’ needs, prioritising long-term value and trust over the short-term profit maximisation that is typical of shareholder models. This is a large reason why mutual companies often rank highly in industry metrics such as Net Promoter Score (NPS), which measures an organisation’s performance through its customers’ eyes.

Bain & Co research shows that companies focused on long-term profitable growth have an NPS twice as high as that of the average company. In addition, risk advisers surveyed in the 2024 Australian Financial Advice Landscape Report awarded a mutual risk insurer with the highest NPS score in the industry for the second consecutive year. These scores reflect deeper customer loyalty, increased referrals and stronger revenue growth – demonstrating that putting members first can be a winning strategy.

A high NPS is strongly linked to factors such as retention rates, competitive pricing and operational efficiencies (Source: Bain & Co). These factors enable mutuals to foster long-term, stable client relationships, which ultimately reduces churn and creates more growth opportunities for the advisers they work with.

Tangible benefits for advisers

The benefits of partnering with mutual risk insurers go beyond just strong client relationships; they directly translate into a few tangible advantages for advisers:

1. Fewer policy lapses

Mutual providers have stronger retention rates, which for advisers equates to a more stable environment where clients are more likely to stay loyal and policies are less likely to lapse. According to the NMG Retail Advice Channel Risk Distribution Monitor Q4 2024, an Australian mutual risk insurance business has an annual lapse rate of 5 per cent, compared to an industry average of 14.5 per cent. In practice, this means fewer lost clients and more opportunities for long-term, proactive engagement. With less time spent replacing business, advisers can focus on fostering deeper relationships and pursuing new growth opportunities in a competitive market.

2. Cross-sell and upsell opportunities

Clients who are satisfied with their risk insurance are more likely to see the value in expanding their coverage as their needs evolve. This presents advisers with opportunities to upsell by adjusting coverage levels in line with a client’s increasing income, growing practice, or rising financial commitments. Additionally, it opens the door to cross-selling other financial solutions that enhance their overall financial security, deepening the adviser’s value proposition and driving business growth.

3. Organic referrals

One of the unique characteristics of a mutual is the profit-sharing arrangement, where profits are either reinvested in the business or distributed among its members. This ongoing benefit creates a value proposition that clients are more likely to recommend to friends, colleagues and family members, compared to traditional insurance offerings, which typically only provide financial payback in the unfortunate event of a claim. The sense of shared value and mutual benefit encourages clients to refer others, driving organic growth for advisers and paving the way for sustainable, long-term success.

Mutuals’ winning formula for loyalty, retention and growth

Today, the financial services industry is increasingly defined by economic uncertainty, regulatory scrutiny and consumer demand for transparency. This means that sustainable business practices are more important than ever before, since a long-term view is vital when it comes to client retention and organic growth.

The adviser-mutual partnership then offers a distinct edge: the trust, loyalty and long-term value that comes with a member-first approach provides advisers with the stability needed to focus on what matters most: their clients’ futures.

Michael Pillemer, CEO, PPS Mutual