Mutual Insurance Companies: Summary. Definition of Mutual Insurance Companies, Cooperatives and the Role of Members.
Mutual societies are organizations that provide their members with goods, services, or employment opportunities on particularly advantageous terms. These societies create a direct relationship between producer and consumer or between client and worker, allowing members to obtain a lower-than-market price for the purchase of goods or services or a higher-than-market wage. Their goal is to save members money or provide them with a higher wage.
To benefit from mutual societies, it is necessary for the member to participate in the society and for the society to conclude with him one or more transactions that involve the creation of goods or the provision of services that are the object of the society’s activity. There are two types of mutual societies: cooperative societies and mutual insurance societies.
MUTUAL INSURANCE COMPANIES
Mutual insurance companies are organizations that create a common fund among those who are exposed to the same risk, in order to insure each other against damages. The roles of member and insured necessarily coincide: one becomes a member only by taking out insurance with the company and this status is automatically lost when the insurance expires. Each member, as such, is an insured and the insurance benefit is provided by the mutual insurer only in favor of the members. The contributions that the members undertake to pay periodically have the function of both contributions to the company and that of insurance premiums. Mutual insurance companies are subject to the provisions established for cooperative companies and insurance companies. The articles of association may also provide for the existence of supporting members, who make direct contributions to create guarantee funds for the payment of indemnities. The votes of these members must be overall lower than those of the other members. The majority of directors must be insured members.
