The Financial Services Authority (FSA) has failed to recognise the virtues of mutuals, Royal London says.
Gareth Evans, head of corporate affairs at the UK's largest mutual life and pensions provider Royal London Group, made the comments during a fringe event at the Liberal Democrat conference.
"The FSA keeps saying bizarre things about with-profits funds, which is the engine of our growth. It is trying to constrain the way we use with-profits," Evans said.
"The regulator has appointed someone to look into building societies, but has not appointed an equivalent for mutuals in the insurance sector, although Hector Sants has said this may happen at the Prudential Regulatory Authority (PRA).
"We believe there should be a representative for mutuals when the FSA is making policy."
Evans said the FSA is now speaking to mutuals in more favourable terms but small mutuals are still treated poorly by the regulator.
He claimed mutuals have lower prices, a higher return on investments and better customer service levels than banks or providers not owned by their members.
Evans called for greater dialogue between the Treasury and the mutuals sector and demanded the government level the playing field between mutuals and other forms of business.
Liberal Democrat Baroness Maddock, who chaired the event, said she would investigate the possibility of a Treasury Select Committee inquiry into the barriers preventing new mutuals from entering the market.
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