Main Types of Mutual Insurance Companies

Assessment Mutuals 

This type of mutual can charge higher premiums if claims and expenses turn out to be greater than projected. Very few mutual insurance companies are organised in this manner, as additional premiums or levies can be difficult to collect. 

Advance Premium Mutuals

More commonly used is an advance premium mutual, where higher premiums or levies cannot be charged for policies already sold. Instead, the mutual pays any higher than expected losses out of its surplus (the difference between its income and expenditure). It then reviews the premium adequacy for future renewals and imposes premium increases at renewal as required. Under an Advance Premium Mutual, any excess surpluses can be returned either as a payment to members or as a reduced premium. 

As with all types of insurance, actuarial input is essential, especially on longer-tail liability and classes. This is to ensure that any surplus is sufficient to meet any claims that may arise in the future after the recovery of any reinsurance. 

Other Types Of Mutual Insurance Companies

Friendly Societies

Friendly Societies have been in existence since before the arrival of the concept of the welfare state and the availability of modern insurance. 

Originally they provided insurance for a body of people for the purposes of insurance, pensions, savings or cooperative banking. Many of these companies still exist, offering lower premiums to policyholders and some have grown into recognised brands that compete with the commercial markets. 

Friendly societies are today prevalent in many parts of the developing world where normal insurance is either unavailable or unaffordable.

Other Types Of Mutual Insurance Companies (USA) 

Factory Mutuals 

These types of mutual were established in the USA as commercial property insurers to insure factories and industrial sites. Often these mutual will develop special expertise in this sector where sums insured can be very high. 

Generally, an insured member will need to comply with rigorous construction requirements as well as safety controls to prevent fire damage. The mutual will tend to work closely with each member, normally visiting the member’s site(s) and offering loss control advice on a regular basis. As the book of business is better controlled in this manner, loss experience should be better than normal commercial insurance and members, therefore, benefit from reduced premiums. 

Fraternal Mutuals 

Fraternal Mutuals are mutual insurance companies that provide life and accident and health insurance to people who are members of social or religious organizations. 

Also in this section

Starting a Mutual Insurance Company
Reinsuring Mutual Insurance Companies