MUTUALITY. - The concept of mutuality is closely connected to those of social insurance and insurance. In a technical sense, mutuality means the union of a group of persons subject to the same risk and bound by an agreement, explicit or implicit, under which the losses that will befall individuals as a result of the occurrence of the event connected with the risk in question are apportioned according to appropriate criteria among all the members. Mutuality therefore constitutes one of the two premises on which the economic fact of insurance is based, while the other essential requirement for the establishment of the insurance relationship consists in the existence of a risk upon whose occurrence a need of an economic character arises for the person affected.
The constitution of a mutuality in the sense specified can come about through spontaneous agreement among individuals, and then mutual associations arise, or it can derive from the work of an entrepreneur who manages the insurance and who gathers a sufficient number of persons to whom he guarantees indemnification upon the occurrence of the insured risks.
The methods through which the sums owed to those struck by the loss are apportioned among all the members of the group that constitutes the mutuality vary from case to case. In the earliest mutual associations, which arose as far back as the times of ancient Rome (Collegia tenuiorum) and developed subsequently during the Middle Ages, especially with the trade guilds, the apportionment of losses very often took place at the moment when one or more members were struck by the loss. Later it was considered more appropriate to require from the outset a suitable contribution (premium) in order to set aside the means for future indemnities, subject to subsequent adjustments between sums collected and sums paid out. When finally the modern insurance enterprises arose, the system of the fixed premium prevailed, determined at the time of the stipulation of the contract, with the unfavorable discrepancies in management resulting from the occurrence of a greater number of losses than those foreseen remaining the responsibility of the enterprise. The criterion of adjustment nevertheless persists, albeit in a somewhat different manner, in enterprises that have retained the mutual form.
As regards the methods by which premiums are fixed or charges are apportioned among the individual members of a given mutuality, in private insurance the general principle holds that each person must pay in proportion to the intensity of the risk pertaining to him. Thus in a life insurance policy the individuals will be called upon to contribute taking age into account, and in fire insurance buildings used for industrial purposes will be taxed at a higher rate than dwelling houses. This principle is set aside in social insurance administered in compulsory form, in which the contributions of individuals are subject to different criteria and are often related to individual wages.
In a less technical and more general sense, the word mutuality serves to indicate that vast movement of spontaneous association which has led, since the most ancient times, to the constitution of the various forms of mutual societies, arising for the guarantee of the most disparate risks (old age, death, funeral expenses, illness, invalidity, unemployment, accidents, fires, livestock epidemics, hail, etc.). This term is therefore frequently used in contrast to the other forms through which insurance or social insurance in general can be administered (insurance enterprises in the strict sense, public institutes of private or social insurance, welfare institutes, etc.).
With the spread of modern ideas of social protection and social security and of the systems introduced to that end in the principal states, as well as with the evolution and improvement of private insurance enterprises, the mutualist movement, which in the past played a role of primary importance as a stimulus and education toward social insurance and as a check on the speculations of unscrupulous entrepreneurs, today tends to assume more modest tasks, turning to those forms of supplementary social insurance that concern particular groups or to those sectors still excluded from the general systems of social insurance.