Insurance alternative

What’s a Discretionary Mutual Fund? | Our Ark Australia

Firstly, what’s a Mutual?

Many organisations, including insurance companies, claim that customers are at the heart of everything they do. With a Mutual, a fundamental part of its legal structure is that customers become owners of the organisation.

There’s no better way to have customers at the heart of an organisation than by ensuring they are part-owners. The Members of a Mutual then become a community that is aligned to ensure the success of each Member and, the organisation.

So, what’s a Discretionary Mutual Fund?

Mutuals can provide a wide range of financial services. A Discretionary Mutual Fund is a specific type of organisation that offer an insurance-like product called risk protection.

There are many similarities between Insurance and Risk Protection, yet there are also key differences that empower the Members of the Mutual.

Insurance vs an insurance alternative

Both insurance and risk protection, as an alternative to insurance are:

  • Intended to provide financial support in the event of a claim
  • Created using actuarial analysis and underwriting parameters that determine the risks and the price to be paid to provide protection from those risks
  • Supported by reinsurance for protection against catastrophic events

The difference empowered by an alternative to insurance

The differences with Risk Protection products offered by Discretionary Mutual Funds are subtle yet significant.

  • With insurance, the insured as a contractual right for a claim to be paid if it meets every requirement in the terms and conditions as state in the policy. If the claim does not meet those requirements, the insurance company can decline the claim.
  • With risk protection, the protected party is entitled to have their claim considered even if, at face value, not all terms and conditions are met.  

This means, that if the terms and conditions are met, then the claim is paid, as it would be with insurance.

However, if there is uncertainty, the claim will still be considered by the Mutual. In this instance, the Board of the Discretionary Mutual Fund has the discretion to pay the claim.

Now, remembering that a Mutual is owned by its Members who also have representation on the Board, it means that these claims will be assessed by people who understand the operations and situation of the effected Member.

This subtle yet vital difference ensures that Discretionary Mutual Funds, like Our Ark, operate in a way that benefits every Members.

This is one of the ways that a Discretionary Mutual Fund like Our Ark places its Members at its heart.