Leaving the Back Door Open

By David Lloyd
Consultant, Regis & Partners, Perth

When pilot friends of mine work out their flight plans, they must have something up their sleeves to deal with the unexpected.

It is ingrained from their early training that there is always sufficient reserve fuel plus a safety margin to reach an alternative destination if conditions put the original out of reach. You plan for the alternative, and ensure everyone who should know does know your plan.

They call it Leaving the Back Door Open, essentially ensuring they have a viable alternative so they can fly another day.

The key word is alternative, a principle which many private pilots incorporate into their professional lives. Their common sense tells them to keep an alternative business back door open just like the one safeguarding them aloft.

This encourages them to identify business options, to think outside the square when deciding what’s best for their viability in important areas. Like insurance alternatives.

Quite often that leads them to mutuals; you’ve heard about them – they’ve been around for centuries – groups of people with a common interest who pool their resources and experience to form a mutual specially designed to protect individual members, their businesses and their personal circumstances.

At this stage I should declare my interest, because I have links with pilots and with the world of mutuals.

So I know that pilots dedicated to leaving the back door open are those I want to fly with, just as I know mutuals really do work. They encourage members of like-minded groups to get together with professional mutual managers and lay down their business and personal protection wish lists.

Note I wrote protections. That’s because the job of mutuals I am talking about is as an alternative to traditional insurance.

However, they do use the familiar insurance and reinsurance services to reassure members they are not on their own when major claims are made.

Mutuals are not publicly listed companies whose shareholders demand a dividend, with reps on the road earning commissions. They are not-for-profit organisations, managed by professionals and driven by their own member-appointed boards.

Mutuals are in business for the benefit of members. Their protections can be as wide as needed, often providing protections not available anywhere else. That means you can tailor your protections to precisely match your requirements.

They are also a numbers game; the greater the number of members, the greater the strength of the mutual and potentially the stronger the protection covering the individual.

Excess earnings are used to match claims reserving requirements of the industry regulator and any self-imposed figure. Basically the more money mutuals have in reserve, the less they need pay for reinsurance. They are required at all times to have access to sufficient resources to meet existing and anticipated claims.

Because mutuals exist for the benefit of members, once claims have been made and claims reserving targets met, any surpluses could be used to reward the members, according to the board’s determination.

When that happens it is a member bonus. The real benefit is that probably for the first time members have the opportunity to contribute to the scale and scope of their own protections. They may save money; protection levels which have been out of reach before become possible; protections which others can’t handle can be done and the mutual becomes a one-stop shop for those seeking the widest business and personal protections on a 24/7 basis.

There’s more: risk assessment and reduction becomes much more creative when members own a piece of the action, when they appreciate the value of protections designed to suit them, not a remote corporate entity.

Mutuals give them a voice that could have been stifled before. And mutuals are so people-and-their-businesses oriented, so transparent in their operation and proactive our door is always open.

The key to this door is your business and personal protections wish list.