Steve Burnett, the chief executive of Royal Liver, admits that we would probably not have been having this conversation five years ago. Then, mutual financial services businesses were rushing to the market for access to the billions available on capital markets, and the concept of mutualisation, of businesses owned by their members and reliant on them for funds, was going the way of the dodo.

The rush was led by Standard Life, a hoary old Scottish insurer that arrived on the stock market in 2006. By a coincidence, it was the preparations for this that led to the formation of the Association of Mutual Insurers (AMI), for firms that wanted to maintain their mutual status. In December Mr Burnett became its chairman.

Today, many suggest that mutual status has protected firms such as Royal Liver from the excesses that overtook their quoted brethren and the rest of the banking industry. Royal, founded in 1850, is owned and controlled by its 1.7 million members. “I think there's a fantastic opportunity for mutuals at the moment. People out there are fundamentally mistrustful of financial services organisations,” he said.

Research commissioned by Royal Liver seems to confirm this. It showed 65 per cent of respondents mistrusted the financial services industry as a whole. In all, 73 per cent were concerned that such businesses would put shareholders' interests ahead of those of policyholders. At a mutual, this would be impossible because they are one and the same.

Indeed, 69 per cent said that they were more attracted to a company run by its customers. All this, Mr Burnett argues, suggests that mutualisation, rather than heading for extinction, has a future as an important business strategy: “I think the model is set fair.” Yet the industry will have to change. There are more than 100 friendly societies in the life and health insurance area alongside Royal Liver, although an unspecified number are closed to new entrants. Many provide services to specific professions, such as the police, farmers or the clergy.

Mr Burnett thinks that market is ripe for consolidation. All those friendly societies have back-office functions that could be combined, while their brands continue their separate ways.

Royal Liver talked to Royal London, about ten times its size, but the talks were broken off. Many friendly societies are struggling in the current turmoil and Mr Burnett believes that mergers are inevitable. “I think the financial turbulence might be the catalyst. It feels a bit like the dominoes are stacking up. There will come a time when one or two will fall over.”

Royal Liver has gone through its own transition since Mr Burnett arrived as chief executive in 2002. It is still a strange beast, with an unusual structure and governance. The business was founded by nine local men as the Liverpool Lyver Burial Society, to fund funerals and save families from ruin when a wage-earning relative died. “It was a typical friendly society story — people wanted to get together to protect themselves. If I'm honest, part of this organisation's problem is looking backwards, not forwards. We can't afford to sit on our laurels.”

The business is based in the Royal Liver Building, which, when completed in 1911, was one of the first buildings in the world to be built out of reinforced concrete. It was recently voted the most iconic structure in the North West, and Mr Burnett said: “We're obsessed with it. Our members absolutely adore it.”

Those 1.7 million members are split into 230 constituencies, and each of these votes for a member to represent them as a delegate. Some delegates have served for 50 years; others are the third generation to serve. The first woman was elected as recently as 1983, and then only after legal action.

The Royal Liver has £3 billion of funds under management and sees new business premium income of £20 million a year. It provides life and critical health insurance.

The delegates meet every year to vote on the board's actions. These general meetings used to last a week, now take about four days and in future, Mr Burnett hopes, will be slimmed down to three. The society tries to leave a philanthropic footprint in the host town. This year, primary schools in Llandudno in North Wales will get a Welsh version of a booklet on basic financial education that Royal Liver distributes on Merseyside.

Mr Burnett, 52, is a trained actuary who joined Royal Liver from Swiss Re, which was also based in Liverpool. He said: “It was a very insular organisation at that point. I worked half a mile down the road running another insurance company and I used to drive past all the time. I thought: ‘I've never recruited anyone from in there. I've never lost anyone to in there. I've never met anyone from in there.'”

When he joined, the business was looking for someone who could be a catalyst for change — and change was needed. The company, which had reserves of about £150 million, was spending about £30 million a year more than was coming in. The accounts of life companies are notoriously impenetrable, but it was that simple equation that he put in front of staff and members to demonstrate that the society's time was limited. “That sounds like five years to me. You don't have to be an actuary to work that out,” he said.

A paternalistic culture creating a jobs-for-life mentality was the biggest issue. The company was one of the last in the industry to collect at the door. This was not cost-effective and a workforce of 2,500 was reduced to between 800 and 900.

Mr Burnett was one of the half-dozen founder members of the AMI, which has 34 members. He sees it as playing a role in the consolidation of the industry, if only as an aid to networking. “Companies are quite close together now,” he said. “Five years ago, pre-AMI, contact between mutuals was limited.”

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