Mutuals on the Move: Exclusion Processes in the Welfare State and the Rediscovery of Mutualism

Eva Vriens,Tine De Moor

doi:10.17645/si.v8i1.2125

Abstract

Declining welfare states and increasing privatization of the insurance sector are leaving an increasing number of people, particularly in Europe, without insurance. In many countries, new initiatives like Friendsurance (Germany), Broodfonds (the Netherlands), and Lemonade (US) have emerged to fill this gap. These initiatives, sometimes called peer-to-peer insurance, aim to make insurance fair, transparent, and social again. Resembling 19th-century mutuals, they pool premiums in (small) risk-sharing pools. We compare eleven new mutuals with respect to their institutional, resource, and member characteristics and find two broad typologies. The first bears the most resemblance to the 19th-century mutuals: Members are (partly) responsible for governance, there is no risk differentiation, premiums are fixed and low, and insurance payouts cover basic expenses only and are not guaranteed. The second group, while also applying risk-sharing and redistribution of unused premiums, is organized more like the present-day commercial insurers it reacted against, e.g., with refined InsurTech methods for risk differentiation and a top-down organization. We thus pose that, while both groups of new insurers reinvent the meaning of solidarity by using direct risk-sharing groups (as is central to the concept of mutuals), they have different projected development paths—especially considering how, in case of further growth, they deal with problems of moral hazard and adverse selection.

Highlights

Cok Vrooman (Utrecht University and The Netherlands Institute for Social Research|SCP, the Netherlands) and Marcel Coenders (Utrecht University and The Netherlands Institute for Social Research|SCP, the Netherlands). Be it in the fields of climate and energy, health care and welfare states, politics and governance, or banking and insurance, when it comes to solving collective problems, the shortcomings of market and state have increasingly come to light
By comparing characteristics of mutuals past and present as well as contextual developments leading to their rise, we aim to provide preliminary insights into the role these new initiatives play in our current societies, their future chances, and what factors appear crucial for their resilience
These insurance types may be suitable for mutual insurance, because they lower the uncertainty with respect to how much insurance is needed when claims are filed and for how long

Summary

Introduction

Be it in the fields of climate and energy, health care and welfare states, politics and governance, or banking and insurance, when it comes to solving collective problems, the shortcomings of market and state have increasingly come to light. Social Inclusion, 2020, Volume 8, Issue 1, Pages 225–237 that have not been solved to their satisfaction by traditional suppliers (De Moor, 2015) Parallel to this development in collective resource management, similar developments in the service sector can be noted, in insurance, where new initiatives such as Friendsurance (Germany), Broodfonds (the Netherlands), and Lemonade (US) emerged out of a mounting discontent with the way insurance is currently organized. These insurance organizations, many of which refer to themselves as peer-to-peer (P2P) insurance, aim to reinstate fair, transparent, and social insurance. Their name suggests a one-on-one relationship between those involved, in practice they go back to mutual insurance principles as laid down centuries ago, pooling premiums in (small) risk-sharing pools that introduce many-to-many relationships between members

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