Mutuality in the insurance field means that companies:
- are owned exclusively by the policyholders; and
- have a board of directors which is elected by the policyholders.
Whether they own a farm, a business, a house, or a car, all policyholders of pure farm mutual insurance companies are entitled to one vote.
As policyholders own their mutual insurance company; there are no stockholders. Profits generated by the company are either kept in reserve or distributed in the form of lower premiums.
The goal of Canadian mutual insurance companies is to provide the best products and the best service at the lowest price. Thanks to their local base, mutual insurance companies are in a unique position to develop strategies which better meet the needs of their locality - this is reflected in the products offered, in the superior quality of service provided and in the companies' relationship with their policyholders.
When a mutual insurance company deals with a policyholder, it deals with one of its owners. Mutual insurance companies do not have conflicts of interests; they only have one constituency to serve: their customers (who also happen to be their owners).
By concentrating on their policyholders' needs, mutual insurance companies have established a tradition of innovation; innovation which has brought us more members who, in turn, ensure the long-term viability of the mutual movement.
Although mutual insurance companies are often small in comparison to stock insurance companies, they share back-office functions which generate economies of scales comparable to those enjoyed by larger stock companies. Compounded with the absence of dividends to shareholders, it is understandable how mutual insurance companies have been able to maintain very competitive prices. With a combined loss and expense ratio similar to, or better than, those of larger stock insurance companies; mutual insurance companies are the living proof that in the insurance business there is little relationship between size and financial viability.
