Michael Pascoe is spot on about those who benefit most from demutualisation – it is everyone except the members. And when I say everyone, include all the outsiders and in particular the competition.

Mutuals are an important part of the community and are essential to maintaining a free market economy. What was left – NRMA Motoring and Services (ie what was the Road Service) I’m pleased to say – is now becoming a healthy mutual company once again due to a stable board and good management.

NRMA Insurance was an exceptionally well run mutual company which kept on developing cutting edge technology and thus had developed a fantastic database to profile its risks.

It was the market leader in NSW and wanted to expand in NSW and interstate. Despite all the rhetoric, it had substantial reserves, the best of any general insurance company in Australia, and did not need to demutualise to expand or raise funds — far from it. It had remained a mutual for so long because being on the board was great if you were in the “club” — directors who were all in the sharemarket, but that’s another story.

Yes, it was the new dark forces that wanted to do this and they were unstoppable because they captured directors, staff and media with promises of great riches and free market rewards.

So why did these free marketers really seek to demutualise NRMA? Well, simply, NRMA Insurance kept “the b-stards honest” by competing to keep premiums down. And importantly, it didn’t have to service capital, or return excess profits to members or shareholders [call them shareholders if you wish] – It just operated prudently to serve its members.

It had something unique insurance companies didn’t have – true customer loyalty. It had a database worth its weight in gold. Sure, it also propped up a road service. It wasn’t necessary to be a Road Service member to buy housing insurance – all were welcome. The incredibly cheap high renewal rate was one that today’s marketing professionals envied.

The Insurance industry hated all this. Whilst they had a neat sort of cartel with “NRMA Insurance the NFP Mutual”, it could be a juicier one with “NRMA the Listed”. And NRMA Insurance once floated was a golden goose waiting to pluck … to pluck the public.

They all wanted this – to pluck together. So after the late Don McKay goofed it, they realised they needed a megalomaniac to do it. For some reason Nick Whitlam was given the gig and made his election run on a “no demutualisation” platform, only to reverse this spin less than two years later once he had board control. He cited constant requests by members which no-one ever saw and after extensive surveys no-one asked him or the board to do.

Demutualisation at the NRMA went through after a really vicious war where Whitlam claimed victory saying “over 82% members voted YES”. Whitlam rubbish as usual. The reality was that if only five out of the 1,800,000 members participated in the vote, only four! members had to vote YES to make it 75% approval!

Whitlam thus only got 41% support out of the total membership, desperately seeking votes where he knew they wanted the cash or the shares. He even had people spinning out in the suburbs, like Werriwa, EGW’s old seat.

To get this 7% margin of support over participation Whitlam had to spend $250,000 on a last minute push poll to tens of thousands of members by one of his crony commercial supporters — a Cremorne based telemarketing group. It was a day by day tally countdown, modelled on the old local council election dead resident voting scam.

Thus it emerged 893,780 NRMA members were absolutely silent, unimpressed and many were plain simple confused about the poll. It was a classic “Majority of a Minority”. The total bill for demutualisation was over $100 million, so much for distributing the wealth to members — all going uptown!

As Michael Pascoe alludes to with the recent NIB decision to float, most members don’t vote let alone read the trees of paperwork and only those who want the cash do. Sure, they want the cash, but they never understand the real and total cost, let alone the gravy trail of advisers.

Most NRMA members cashed in the shares within a few seasons and now pay much higher insurance than they need to. The share money is long gone in extra premiums for the average shareholder. Everything is up for grabs in the search for greater profits (read performance for execs). I think most mutual members also had a view about local employment – this evaporates of course with call centres off shore and the like.

Crikey readers might wish to reflect on the record growth in recent years across the whole insurance sector. We all remember recent highlights like screw the local smash repairers on costs and then opening NRMA repair centres. I wish Geoff Cousins had been so devoted to small business as much as he is to hugging trees wedging Garrett for Malcolm Turnbull.

Yep, Whitlam unleased a whole new tier of increased insurance premiums and resultant ‘profits for others’ (as opposed to not for profits), and the consumers of NSW should be ever remembering of this…

His gopher CEO after Malcolm Jones (since disqualified by APRA) was the rather abrasive Eric Dodd, now the CEO of MBF, who wants a copycat ride but has a few hurdles ahead … ‘persuading’ enough of the MBF members for one. Merging with BUPA is a cute caper, not good for members.

Dodd has been searching for an indirect ring road route to demutualisation — for some years — because every time he polls the issue the members say, why — if it ain’t broke don’t fix it! MBF is very healthy and can easily expand on its own. They are wise to him. If it is really wanting economies, then why didn’t it merge with NIB? How about HCF?

Crikey readers should understand that retention of MBF and its main competitor HCF, are integral to keeping our health system public in Australia. The moment these health mutuals (and Medibank Private) are gone, we are on the road to an USA Health system, and if there is one thing Aussies are passionate about (after their car) it is access to their world class affordable health system.

Dodd would do well to focus on expanding MBF – a fine mutual … rather than fleecing it. Of all people he should know “Members Remember”.