If you have ever opened a savings account, taken out a mortgage, or looked into health insurance in the UK, you have likely come across names like Nationwide or The Exeter. While they look like standard banks or insurance providers, they operate on a completely different business model: they are mutuals.
Most large businesses are owned by external shareholders. Their primary goal is to generate profit and pay out dividends to the shareholders. A mutual flips this model on its head. A mutual is an organization owned entirely by its customers (who are called members).
Because a mutual has no external shareholders to satisfy:
- Surplus profits are kept inside the business.
- Money is funneled back to members through better interest rates, lower fees, expanded coverage, or direct cash payouts.
- Members hold voting rights on how the organization is run.
"Mutual" is the umbrella term. In the UK, there are 2 prominent types of mutuals - i.e. building societies and friendly societies.
A building society is a member-owned mutual financial institution that provides everyday banking, savings accounts, and mortgage lending. Its main purpose (in the past) was to help local communities pool their savings so members can borrow money to buy or build homes. Profits are usually reinvested to benefit members rather than paid to outside shareholders. The largest building society in the world is Nationwide, with other well-known examples including Yorkshire Building Society and Coventry Building Society.
A friendly society is a member-owned mutual insurer that provides cover for health, income protection, and long-term care. Long before the NHS or modern state welfare, workers would pay small weekly amounts into a shared fund so that if a member became sick, injured, or died, the society would pay their lost income or funeral costs. Today, examples include The Exeter, which specialises in health and income insurance, as well as other mutual providers such as Royal London and Liverpool Victoria.
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