Q: What are some of the market trends you'veseen emerge among mutual insurers in the past year, and how havethose trends or challenges been addressed by some of yourmembers?

Mutuals, in an effort to rise above the rest of the crowd, areincreasingly emphasizing what makes mutuals different: that withoutshareholders, mutuals are well positioned to bepolicyholder-focused. While this is an intuitive and fundamentalaspect of mutual insurance, many marketing and brand gurus atmember companies have discovered that mutual traits also resonatewith customers. And the exciting outcome of this is we've seenseveral large insurers roll out brand campaigns putting theirmutual identity first.

Last fall NAMIC launched the “mutual brand” program, wherebymember companies can use professionally created and market-testedadvertising resources that help the companies distinguishthemselves as a mutual. Today, less than a year since its launch,the brand is being used in 18 states and Canada by nearly 50companies.

Q: What particular advantages do youfeel mutual insurers enjoy in the current market, as opposed tothose carriers with shareholders' expectations toconsider?

To be competitive, mutuals have to meet the consumer's demandfor the right coverage at the right price, and the majority of ourmembers usually answer this through the independent agent channel.These agent-partners appreciate the consistent market and long-termrelationship that mutuals offer.

Mutual property & casualty insurance in the U.S. goes backto the mid-1700s—the first successful mutual insurance company wasfounded by Benjamin Franklin in Philadelphia—and the median age ofa mutual today is 120 years.

I think there are two things that make that possible.

First, since there are no shareholders, mutuals don't have thepressure to meet short-term profit expectations. As a result,mutuals can manage their businesses with long-term perspectivesthat don't require as much risk.

Second, because mutual policyholders are “members” of theirmutual, the relationship between the company and the policyholderis stronger. Policyholders are able to have a voice in thedirection of their company through the election of their board ofdirectors. Also, the vast majority of mutual boards consistexclusively of mutual company policyholders.

Small mutual insurance companies have a third advantage, whichis being a local business. And policyholders are likely to see thefolks who work at the mutual in their neighborhood, on their MainStreet. And they're likely to be on a first-name basis withthem.

Q: Do you feel that Washington'stendency to be reactive rather than proactive regarding issuesaffecting insurers has impacted mutual insurers in particular? Andif you could set things right on that front, how wouldyou?

It's not reactive or proactive as much asaware or unaware. As the financial crisis was happening, wesuccessfully educated Congress and other policymakers about theproperty & casualty insurance industry's role in providingstability for our financial system and our economy, even within asystemic failure. A recent report by the Government AccountabilityOffice examined the impact of the financial crisis on insurancemarkets and how our industry and regulators responded. The GAOfound that our industry weathered the storm and providedmuch-needed protection for policyholders amidst the economic chaos.In fact, the GAO was clear in reporting that the insuranceindustry's business practices shielded companies and policyholdersfrom the financial meltdown.

The mutual property & casualty insurance industry isresponsible solely to its policyholders. We focus on minimizing therisks they face, including by minimizing the risk to the company.Mutual insurance companies didn't then and don't now deal in thehigh-risk, highly leveraged transactions that caused the crisis,and they are required by law, regulation, and good sense tomaintain a reserve for paying claims. Like every other player inthe financial system, our industry was not unaffected—particularlyon the investment side and with reduced business opportunities in acontracting economy—but as the GAO noted, we recovered quickly andmade sure that at no point was there a risk of a legitimate claimgoing unpaid.

We want—and need—legislators and regulators to develop a betterunderstanding of and appreciation for the differences that existbetween the insurance industry and other financial services firms,as well as the differences between mutual insurers and stockinsurers.

Q: In which markets have mutuals beenparticularly skilled at leveraging their agility in writing newbusiness?

Niche markets have offered robust innovation and growth. At thesame time we see large mutuals very effectively leveragingefficiencies their size creates and mutuals of all sizes and linesof business using their connectedness to customers to theiradvantage.

In the past few years we have also seen new mutual companiesborn, like Build America Mutual Assurance Company, which opened itsdoors for business in July 2012. While it's the newest mutualinsurance company in the United States, BAM is also the firstmutual insurer of municipal bonds.

Privilege Underwriters Reciprocal Exchange, based in New York,was founded in 2006. As a reciprocal, PURE is operated for thebenefit of high net worth, responsible policyholders in more than40 states and the District of Columbia who want comprehensive,customized insurance coverage.

These companies and others had a choice to form as stockcompanies or mutuals. They chose mutual because it works.