What is a mutual?
PAMIA is a ‘mutual’ insurance company. A ‘mutual’ provides a vehicle for companies facing similar risks, enabling them to create a collective fund by pooling those risks at cost, without delivering profits to outside shareholders.
A mutual is owned entirely by its Members and any surplus profit produced by operating activities is used for the sole benefit of the mutual’s Members. Because there are no outside shareholders, premiums can potentially be lower. If a mutual serves a relatively low risk sector (like patent and trade mark attorneys), premiums will be lower than those which include higher risk professions (like solicitors, for example).
The management of a mutual insurance company is usually outsourced to a management company, which provides all the services required to run an insurance entity under the supervision of the mutual’s Board of Directors. In the case of PAMIA, these services are provided by Thomas Miller, an experienced manager of insurance schemes for professions.
Cost effective premiums
In common with commercial insurance companies, a mutual charges its Members a premium, known as an Advance Call, at the start of each policy period. However, because a mutual cannot make a loss, it has the right to charge Members an additional premium, known as a Supplementary Call, if it requires additional income to pay claims or increase the reserves.
Over 20 years or more, PAMIA has never made a Supplementary Call and does not expect to have to do so. It reinsures against large claims, to mitigate the risk of any unusually large settlement.
A mutual’s right to levy a Supplementary Call gives its Members a near guarantee that their claims will be paid, a measure of confidence they cannot have in commercial insurance companies.