“In civilised society [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.”
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
Mutual insurance companies make the same promise that stock insurance companies make: “when bad things happen, we’ll help you”. However, the fundamental purpose of each type is quite different. Stock insurance companies are owned by investors and their management teams commit to delivering profits to those investors. They still must pay claims and help their customers become whole according to the agreements they sign, but their goal is to price risk and deliver service most efficiently to have as much left over as possible.
Mutual insurers are owned and chartered to serve policyholders, like cooperatives and credit unions. The customers own the company and vote on board members and major decisions, similar to a democratic government.
Cooperation and mutual aid are critical to successful groups. Even the most competitive organizations usually try to create cooperative cultures among employees while attempting to make customers feel valued.
Insurance is a rough business. As a heavily regulated and often-required product, customer resentment can flow freely. Despite these headwinds, mutual insurers have an incredible opportunity to shift negative sentiment to positive. Without pressure from investors, mutual insurance companies can orient completely around the policyholder.
When marketing, selling and paying claims, transparency and reasonableness can prevail. Without stock market pressures, there is no reason to use fear as a tool to make money. In helping policyholders understand, mitigate, and prevent risk, mutual insurers can help customers feel less afraid of the future. When it’s clear what will happen in the event of a catastrophe or accident, minds can rest easier.
With the principles of mutual aid and democratic participation, mutual insurance companies can work to create a safer, healthier, and less fearful world.
Roman Ryan 