farmers shaking hands

What Are Mutuals?

Mutual insurance has a long history in the United States and around the world and represents a large and important segment of the insurance industry. This segment is one that has the purpose of providing value and protection to its policyholders. Mutuals don’t answer to shareholders - as other kinds of insurance companies do - because they don’t have shareholders. For mutuals, the policyholders/members have distinct governance and other control rights in the company. Below is a brief history of the mutual insurance industry.

Mutual History at a Glance

  • The first operational insurer - the Insurance Office for Houses, a stock company located on the Royal Exchange - was founded in 1681.
  • Fifteen years later, Contributors for Insuring Houses, Chambers or Rooms from Loss by Fire by Amicable Contribution became the first mutual fire insurance company.
  • The first insurers in the United States were mutual companies, created by farmers and property owners with common interests looking to share risk within a large group.
  • The earliest known U.S. insurer was the Friendly Society for Mutual Insurance of Houses Against Fire. The Friendly Society began operations in 1736 in Charleston, South Carolina, however in 1740, Charleston suffered a fire and the losses sustained by the Society caused it to fail.
  • In 1752, Benjamin Franklin and colleagues founded The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. It is still in business today.
  • The Homestead Act of 1862 gave 160 acres of western farmland to any citizen willing to claim it. Homesteaders settling in the new farmland did not trust business and financial entities on the northeastern coast. This sentiment led farmers to create their own social and political organizations, often called “Granges.” The Grange in each state lobbied for laws allowing formation of farm mutual fire insurance companies, and it often served as an organizational foundation for the state’s first farm mutual insurers.
  • The farm mutual movement, during which approximately 1,100 county farm mutual insurance companies were formed, occurred between 1870 and 1900. The number of farm mutual companies grew through the first half of the 1920s, peaking near 2,000 in 1925.
  • In the next several decades as farms became larger and the number of farmers decreased, these companies consolidated and began to offer new insurance products. This consolidation of companies and expansion of business lines gave us many of the mutual companies whose names we recognize today.
  • Throughout their history, mutual companies have provided a stable economic platform because they are not subject to meeting quarterly stock performance metrics. The mutual model provides a structure that has proven durable and compatible with the long-term nature of insurance needs. It is not a coincidence that more than half of the mutual insurance companies operating today are more than 100 years old, with the median age of 120.