‘Mutual insurance is an idea whereby every man might help another’

The first mutual fire insurance company was established in England in 1696. Benjamin Franklin understood the wisdom of the concept and brought it to America in 1752 by founding the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire. As Franklin put it, “Mutual insurance is an idea whereby every man might help another, without any disservice to himself.”

As author John Bainbridge writes in Biography of an Idea: The Story of Mutual Fire and Casualty Insurance, “Mutual insurance is insurance in its purest form.” Many people today are unaware that they are part of a mutual insurance company. They are unaware that by paying their premiums they are part of a heritage whereby they help provide themselves and others with financial protection from life’s unforeseen misfortunes.

The National Association of Mutual Insurance Companies explains that mutuals are owned by their policyholders, unlike stock insurance companies that are owned by investors who may have no other connection with the company. And unlike stock companies, mutual companies exist solely to serve the insurance needs of their policyholders, not to produce investment profits for stockholders. Policyholders of a mutual company may share profits in the form of policyholder dividends. In many instances, they benefit from premium rates that are lower than those of comparable stock insurance companies because mutual enterprises don’t have to worry about shareholder return.

As Bainbridge points out, the company founded by Franklin 24 years before the signing of the Declaration of Independence is still in business today.  “Mutual insurance has flourished like America itself and has kept pace with the changing needs of an expanding nation. Two hundred years ago mutual insurance provided protection against fire and nothing else; today it provides protection against fire and practically everything else. Insurance is indispensable to a free economy and a free society because it protects the things we own and produce, but also gives us the confidence to continue to own and produce more. The basic function of insurance is to provide security…and that is a concept that neither figures nor words can adequately describe.”