MUTUALITY. - The concept of mutuality is closely connected with those of providence and insurance. In technical terms, mutuality refers to the gathering of a group of persons subject to the same risk and united by an explicit or implicit agreement, under which the damages suffered by individuals due to the occurrence of the event connected with the risk in question are distributed among all the members according to approved criteria. Mutuality thus constitutes one of the two prerequisites upon 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, the occurrence of which gives rise to an economic need for the person affected.
The establishment of mutuality in the specified sense can occur through spontaneous agreement among individuals, giving rise to mutual associations, or it can result from the work of an entrepreneur who manages the insurance and gathers a sufficient number of people to whom he guarantees compensation upon the occurrence of insured risks.
The methods by which the sums due to those affected by a loss are distributed among all the members of the group constituting the mutuality vary from case to case. In the earliest mutual associations, which arose even in ancient Rome (Collegia tenuiorum) and developed further during the Middle Ages, especially through craft guilds, the distribution of losses often took place at the moment when one or more members suffered a loss. Subsequently, it was deemed more appropriate to require an appropriate contribution (premium) from the outset to provide funds for future compensation, with subsequent adjustments made between sums collected and sums paid. When modern insurance companies emerged, the system of fixed premiums prevailed, determined at the time of contract stipulation, with the company bearing the unfavorable deviations from management deriving from the occurrence of a greater number of losses than those anticipated. The adjustment criterion, however, persists, albeit in a somewhat different form, in companies that have retained the mutual form.
Regarding the methods by which premiums are set and burdens are distributed among 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 to which they are subject. Thus, in life insurance, individuals will be called upon to contribute based on age, and in fire insurance, industrial buildings will be taxed at a higher rate than residential houses. This principle is disregarded in social insurance managed in a compulsory form, where individual contributions are subject to different criteria and are often related to individual wages.
In a less technical and more general sense, the term mutuality serves to indicate that broad movement of spontaneous association which, from very ancient times, has led to the establishment of various forms of mutual aid societies, created to guarantee against the most diverse risks (old age, death, funeral expenses, illness, disability, unemployment, accidents, fires, livestock epidemics, hail, etc.). This term is therefore frequently used in contrast to other forms through which insurance or, more generally, providence can be managed (insurance companies in the strict sense, public institutes for private or social insurance, welfare institutions, etc.).
With the spread of modern ideas of social protection and social security and the systems introduced for this purpose in the main states, as well as with the evolution and improvement of private insurance companies, the mutualistic movement—which in the past played a primary role as an incentive and education in providence and as a safeguard against the speculations of unscrupulous entrepreneurs—tends today to assume more modest tasks, focusing on forms of supplementary providence that interest particular groups or sectors still excluded from general social providence schemes.