What is a Mutual

Definition

Mutuals grouped together within AIM are groupings of persons with social-welfare objectives and without a profit motive, whose goal is to provide protection against the consequences of various social risks to their members and members’ families.

They generally provide voluntary social welfare coverage and access to social services financed on the basis of solidarity, whose scope is defined democratically by the members.

Values and principles

A mutual is a social enterprise based on the following values:

  1. Solidarity: everyone contributes equitably according to his/her income and benefit from services according to his/her needs.
  2. Non-profit orientation: the object is social, there are no shareholders to pay, any financial surplus is reinvested in the creation or the improvement of services and the commitment is on long term.
  3. Democracy: it is the principle of “one man-one vote”. The management is autonomous, the mutual is independent from the government and there is no shared ownership. Although obliged to observe the national legislations and consequently subjected to the control of the public authorities, it is first its statutory bodies which have a democratic control on its functioning. The autonomy and the democratic structure of mutual societies bring dynamism and ensure a constant adjustment of their services to specific

Its operating principles are:

  1. Primacy of the person and the object of the mutual over the capital,
  2. Voluntary membership,
  3. Responsibility or the ability to find solutions for the encountered difficulties,
  4. Independence,
  5. An effective and rigorous management.

The unique role of mutual societies has also been recognised by the European Parliament study: “The role of mutual societies in the 21st century” from 2011.

“Mutual societies are voluntary groups of persons (natural or legal) whose purpose is primarily to meet the needs of their members rather than achieve a return on investment. They operate according to the principles of solidarity between members, who participate in the governance of the business. Together with cooperatives, foundations and associations, mutual enterprises are one of the main components of the social economy, or third sector, in the European Union”.

Difference with Insurance companies

Members vs Shareholders

In Mutual societies the members or their representatives primarily finance the mutual society. As members, they take part directly in defining the mutual’s policy or have the right to influence that policy.

As capital companies they can finance themselves through capital increases or make public offerings.
In Insurance companies, the external shareholders seek to make profit.

Reinvestment vs Profit distribution

Surpluses generated by mutual societies may not be distributed to individual members, but must imperatively be reinvested in activities and services to the benefit of the community, exclusively for health and social purposes.

As commercial companies, insurance companies have a mission to generate surpluses and distribute them to their shareholders.

Solidarity vs Risk-Selection

Mutual societies organise solidarity among their members.  Unlike for-profit insurance companies, which base their premiums on age or individual degree of risk, mutual societies apply a single contribution for the risk of sickness.

On the other hand insurance companies conduct personalised risk selection that involve excluding people with a high risk of illness (“bad risks”). Contributions are based on the specific risk an insured person represents.

Thus the principle of social equity (“We all fall ill, we all age and we must all help one another”) contrasts with the principle of actuarial equity (“Why should I pay a small portion of the medical bills of people who are older or sicker than I am?”)

Restricted scope of health vs Unlimited scope

Mutual societies’ activities fall within the scope of social protection exclusively as concerns individuals.

Insurance companies also insure goods, liability and individuals.  At the same time, mutual societies’ activities extend far beyond the scope of insurance and involve a rather holistic approach to members’ health and welfare.

 

Added value and contribution of the mutuals

Mutual societies’ features often make them better equipped than other types of companies to meet certain needs of the population or bridge gaps left by the market and state management.  One important area where they are active is that of social protection and access to health care1.  In this field, mutual societies are much more effective than profit-making actors, as services are provided at cost price.

Mutual societies offer a form of protection that involves members (consumers) in the definition of a range of high-quality services at prices that do not reflect profit margins.  In this way, and thanks to pooling, they provide access for everyone to services that — particularly within the health and social field — are considered essential.  Mutual societies are also a force for active involvement and citizenship, and thereby promote social cohesion.

Several studies have moreover demonstrated the significant degree of trust mutual societies enjoy among the public.