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JUNE 2014

Mutual Insurance Companies
are Cooperatively-Owned

Wisconsin has a proud history of creating cooperatively-owned mutual insurance companies. That rich history was built upon the hyperactivity of perhaps the greatest American who never served as President -- Benjamin Franklin. Even though Franklin was already busy founding the U.S. Postal Service and the University of Pennsylvania, discovering the conductivity of electricity and mapping the Gulf Stream, and, of course, serving as one of our nation’s Founding Fathers by helping to draft the Declaration of Independence, he found time to join with his fellow Philadelphia firefighters in 1752 to form the Philadelphia Contributorship. This mutual insurance company was created to insure homes and businesses from loss due to fire and, incredibly, continues to operate today. For good reason, American cooperative leaders view Benjamin Franklin as the founder of the first American cooperative.

Like other cooperatives, mutually-owned insurance companies are owned by policyholders rather than by stockholders who may, or may not, actually purchase the insurance. Any surplus either remains in the company’s account or may be refunded to the policy holders, at their discretion. Wisconsin is home to 56 cooperatively-owned “town mutual insurance companies,” some of which have operated for more than 140 years. These mutual insurance companies were authorized by Wisconsin law to provide insurance protection to property owners so that they were protected from financial ruin in the event of catastrophe with the insurance being provided at a fair cost. Like electric and telephone cooperatives, town mutual insurers were created because of the difficulty farmers and other rural residents had in purchasing affordable insurance that would protect them from the risk of loss from accidents, fire, and adverse weather events, among others. This was needed because large national insurers viewed farmers and other rural residents who supported farming as being involved in risky occupations.

Unlike large national insurance companies, Wisconsin town mutual insurers reinvest their funds in local credit unions and community banks and support local communities by purchasing goods, supplies and services in their local communities. Town mutuals also often purchase municipal bonds which support local schools, hospitals, road work and sewage treatment plants, and provide charitable support to 4-H, farm safety programs and local fire departments. Town mutual insurers are governed by a board of directors elected from policyholders who live in the community.

Wisconsin is also home to a number of specialty mutual insurance companies, including the 117 year-old Church Mutual in Merrill and 127 year old Badger Mutual in Milwaukee. Church Mutual is one of the nation’s top insurers of churches and Badger Mutual was formed by Lutheran Church members to insure their churches and property. Local units of government have formed mutual insurance companies to provide insurance coverage. For example, Wisconsin counties hard hit by large insurance premium increases formed Wisconsin County Mutual Insurance Corporation in 1988.

Wisconsin is fortunate to be home to several large national mutual insurers, including American Family Insurance, a Fortune 500 property and casualty insurance company headquartered in Sun Prairie and Northwestern Mutual Life, a diversified financial services company headquartered in Milwaukee ranked #116 on the Fortune 500 list. Both insurance companies are owned by policyholders rather than stockholders and, as cooperatives, focus on providing the insurance products and services their policyholders want and need over the long term, versus the need to generate short-term profit for their stockholders.


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