INSURANCE

Mutual insurance companies, of course, do not accept any of the charges made against them. They are quick to point out that the oldest insurance company in America today is a mutual carrier founded in 1752 by Benjamin Franklin.

The position of the mutual companies is summed up in the following statement made by the general counsel of a large mutual casualty insurance company:

"Free enterprise in this country means banks, insurance companies, manufacturing industries and business enterprises owned and controlled, not by the government but by its citizens...The mutual insurance business is diametrically opposed to socialism in every fundamental. It exemplifies one of the finest methods ever devised by which private citizens can work out their own problems...Who would label as socialists the business and private citizens who constitute the boards of directors and direct the destinies of the mutual companies, life, homeowner insurance, fire or casualty? To show how flexible the mental processes are, critics warn of the dangers of mutual insurance and then say "We are not discussing mutual life insurance companies." Obviously, the exclusion of life insurance has no basis in reason or logic."

Mutual insurance obviously operates under a system of free enterprise. Mutual insurance companies require the use of investment funds to build surpluses large enough to satisfy the requirements established by state laws and to pay the cost of operation, much like a company selling home insurance does. This capital is not provided by the state but by private individuals operating under their own initiative. Men who are instrumental in establishing mutual insurance companies, like those who form stock companies, often are motivated by the desire for gain.

They develop responsible positions for themselves within their companies. The result is that their own personal gain is tied up closely with the success of the business. It is nevertheless true that, theoretically, mutuals do not operate for profit. And this in itself is contrary to the basis upon which the great majority of American businesses are conducted.

Whether or not this means that mutual fire and casualty insurance companies are un-American is a matter of individual opinion upon which there seems to be no general agreement. However, if one chooses to conclude that mutual companies are not the American way, this conclusion must apply with equal force to mutual life insurance companies-a conclusion that is rarely reached, perhaps because the life insurance business is predominantly mutual.

Stock and mutual carriers write in excess of 90% of the fire, homeowners insurance and casualty insurance sold in America. Reciprocals, Lloyds, and state funds write the remainder. Since reciprocals are co-operative insurance carriers, the discussion relating to mutuals will also apply to them. Lloyds are proprietary carriers, so that the discussion relating to stock companies also will apply to their unincorporated counterpart.

As might be expected, in some quarters state funds are called un-American. It is argued that no business should be established by the state which will compete with private enterprise so long as private firms are interested and able to provide the public with the necessary service or product at a reasonable price. There is even greater opposition to monopolistic state funds, since many people believe that buyers of insurance should have free choice as to where they purchase their protection.

With very few exceptions, state funds operate principally in the fields of workmen's compensation and unemployment compensation. They provide insurance that is required by law as a part of a broad system of social reform. Those who defend state funds insist that these funds are in keeping with the American way of life. All of them have been established by democratic procedure. Since the insurance is required by the government, the state should also underwrite it. Social insurance, they claim, is a proper state service.