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Mutual insurance

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A Mutual insurance company is an insurance company which has no shareholders but instead is owned entirely by its policyholders. This ownership either extends to all its policyholders or is restricted to certain classes of policyholders. Ownership rights typically include voting rights, for instance in the election of the board of directors. In a mutual insurance company, any distributed surplus funds are paid entirely to policyholders, whereas in a proprietary or stock company (one with shareholders) a proportion of the surplus is paid to shareholders while the balance is held in reserve by the insurer.

The American mutual property/casualty insurance industry was founded in 1752 by Benjamin Franklin when he established the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire,[1] although the mutual concept actually originated in England almost 60 years before when the first mutual fire insurer was conceived.[2] In nearly every country around the globe, there are mutual property/casualty insurance companies.[3] The Association of European Cooperative and Mutual Insurers has argued that European mutual insurance companies promote active policyholder influence, are innovators of new products and services, and actively demonstrate social commitment.[4]

After the global economic crisis in 2008, the mutual property/casualty insurance industry was one segment within the financial services sector that neither needed nor wanted a financial bailout.[5][6] However, primarily because of news coverage of the role American International Group (AIG) played in the crisis, there were and still are some misconceptions about the role played by property/casualty insurance industry. News reports repeatedly and erroneously described the multinational corporation as an “insurance giant,” when in fact AIG was a holding company consisting of a diverse group of businesses – of which about 70 insurance companies were included.[7]

The National Association of Mutual Insurance Companies (NAMIC) is the only U.S. trade association representing mutual property/casualty insurance companies. Since 1895, NAMIC has been serving its U.S. and Canadian members in areas of advocacy and education.[8]

The global trade association for the industry, the International Cooperative and Mutual Insurance Federation, claims 216 members in 74 countries, in turn representing over 400 insurers.[9]

Mutual holding companies

The major disadvantage of the mutual insurance companies is the difficulty of raising capital.[10] In response to this issue, the "mutual holding company" structure was first introduced in Iowa in 1995, and has spread since then.[11] There have been some concerns that the mutual holding company conversion is disadvantageous for the actual owners of the company, the policyholders,[12] and observers such as the Center for Insurance Research have advocated that companies should fully demutualize rather than taking this partial step.[10]

As of August 2010, there is a bill in Congress, H.R. 3291: Mutual Holding Company Beneficial Owners' Protection Act of 2009, which is intended to protect the owners.[13]

List of mutual insurance companies

Kanada

Japan

Spanien

United Kingdom[14]

Vereinigte Staaten

List of demutualized insurance companies

Australien

  • National Mutual Life Association (now known as AXA Australia)
  • AMP (formally know as 'Australian Mutual Provident Society')
  • Colonial Mutual (now part of Commonwealth Bank of Australia)

Japan

Südafrika

Vereinigtes Königreich

Vereinigte Staaten

List of defunct mutual insurance companies

Japan

References

  1. ^ Wright, Janet (1994). The History of the National Association of Mutual Insurance Companies, A Century of Commitment, 1895-1995. Indianapolis, IN: National Association of Mutual Insurance Companies. pp. 1–5. {{cite book}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  2. ^ Wright, Janet (1994). The History of the National Association of Mutual Insurance Companies, A Century of Commitment, 1895-1995. Indianapolis, IN: National Association of Mutual Insurance Companies. pp. 1–5. {{cite book}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  3. ^ "Association of Mutual Insurers and Insurance Cooperatives in Europe". AMICE. Retrieved 24 February 2011.
  4. ^ "Valuing Our Mutuality II, An ACME Study". ACME. 2003. {{cite web}}: Missing or empty |url= (help); Unknown parameter |month= ignored (help)
  5. ^ Frye, Andrew (27). "U.S. Property Insurers Won't Seek Government Capital (Update1)". www.bloomberg.com. Retrieved 24 February 2011. {{cite web}}: Check date values in: |date= and |year= / |date= mismatch (help); Unknown parameter |coauthors= ignored (|author= suggested) (help); Unknown parameter |month= ignored (help)
  6. ^ Satter, Marlene (December). "Covered by a Tarp?". AdvisorOne. Retrieved 24 February 2011. {{cite web}}: Check date values in: |date= and |year= / |date= mismatch (help); Unknown parameter |month= ignored (help)
  7. ^ Harrington, Ph.D., Scott E. (2009). "The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation" (PDF). NAMIC. Retrieved 24 February 2011. {{cite web}}: Unknown parameter |month= ignored (help)
  8. ^ Wright, Janet (1994). The History of the National Association of Mutual Insurance Companies, A Century of Commitment, 1895-1995. Indianapolis, IN: National Association of Mutual Insurance Companies. p. 21. {{cite book}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  9. ^ ICMIF: Members list. Retrieved on March 5, 2010.
  10. ^ a b What demutualization means for policyholders. Insure.com.
  11. ^ Banstetter et al. (1997). The Mutual Holding Company: A New Structural Option. The Association of Life Insurance Counsel.
  12. ^ Rambeck R. (2001). Mutual Holding Company: A Shell Game Without the Pea. Insurance Journal.
  13. ^ H.R. 3291: Mutual Holding Company Beneficial Owners' Protection Act of 2009. GovTrack.
  14. ^ AFM members. Association of Financial Mutuals. Retrieved on March 5, 2010. A longer list of UK mutual insurers.
  15. ^ Guardian Life's description of being a mutual insurance company
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