Re-adopting the mutual insurance model is the key to the future viability of the life insurance industry, a new “white paper” by former financial adviser and Alliton Capital founder Barry Daniels says.

He says the industry “abandoned its long-held conservative principles and the new breed of manager went on a frenzy devouring itself”, losing many household brands in the process.

The core of the industry’s failings is the principle that shareholders’ interests are prioritised over customers, he says. The detrimental effects of regulation on both the structure of the financial services sector and the real economy have worsened the situation.

And he notes predictions that up to 6000 small advice practices will close before 2026, saying the cost of providing professional advice and life insurance has skyrocketed.

Mr Daniels urges legislators and the life industry to revisit the mutual model with a modern-day adaption to restore “much-needed certainty, trust and confidence to the life insurance sector”.

“The Hayne royal commission has shown that the post-mutual era has been a disaster and against this backdrop of the major banks and AMP reconsidering their positions, the re-emergence of the mutual insurance model in Australia could be the answer to the industry’s future viability.

“For mutual companies to succeed they need to be aligned with the best interests of their policyholder members. What’s more, mutual companies are owned by their policyholders, not shareholders – and that’s a very important and crucial distinction.”

The International Co-operative and Mutual Insurance Federation says premium income from the global mutual insurance sector grew 30% over the past decade, and the global share of mutual/co-operative insurers rose to 26.7% in 2017.

“The growing strength of the mutual model in global marketplaces has affirmed my belief of its re-emergence and inevitability in a modern-day format in Australia,” Mr Daniels says.