Graphic from SBLI.com

I just received a ballot in the mail from my life insurance company, SBLI. They are actually letting me vote for increased membership rights. SBLI is a national insurance company based in Massachusetts with customers in all 50 states except New York. The Board of Trustees has unanimously decided to vote on becoming a mutual insurance company, or known in the industry simply as a mutual. I applaud the move. The more mutuals in the US, the better.

A letter included with the ballot explains that policyholders like me can have a more controlling interest in the business. I would gain membership rights including voting rights:

‘Policyholders and holders of annuity contracts will have membership rights, including the right to annually elect directors and to consider such other matters as are considered at annual and special meetings, in the mutual company.’

Taking care of policyholders may seem like a no-brainer. But central to the conversion to a mutual is what’s being cut out of the new structure:

‘With the elimination of shareholders, the Board of Directors of SBLI can focus exclusively on operating the Company in the interests of policyholders and holders of annuity contracts.’

Finally, the reality of external shareholders is described, and what SBLI wants to do away with:

‘As a result of changes in capital requirements applicable to the Company’s shareholders, all of which are banks, it is expected that dividend payments to shareholders would increase over time. If shareholder dividends were to increase, SBLI’s capital would be reduced, potentially negatively affecting the Company’s financial strength. This could reduce amounts available to pay policyholder dividends. Elimination of the shareholder ownership structure is expected to protect policy dividends from potential competing claims from shareholders.’

A true cooperative structure comes from democratic governance, and the degree to which SBLI becomes democratic remains to be seen. But SBLI’s move away from outside investors removes an extractive element of the business. This move to a mutually owned structure will cut down costs for all members (ideally), create independency, and improve sustainability.