New Role of Mutual Insurers on the Insurance Market

A phenomenon in the insurance industry is that both mutual and stock firms dominate the market. Mutual and stock companies differ fundamentally. In a mutual organization, consumers are also owners. They provide capital and bear the risk. And because of that the mutual form is free of the conflict of interest between the owner and the consumer. In stock organizations, the owners and the consumers are distinct. The owners supply capital and receive the residual value; the risk is shared between the owners and consumers. For many years in the literature, we try to find out the causes of coexistence of mutual and commercial insurers. The issue has been pointed out in the theory of enterprises (mainly the theory of agency) or the theory of finance (in connection with the effectiveness or availability of capital). At the same time, in the last several years, we could observe a change in the concept of financial institutions’ operations. They no longer play a subordinate role to the real economy, and they have become a generator of profits for investors. A clear result of such action was the financial crisis 2007–2008. However, it seems that this trend is not stopped in the insurance sector. Such action involves a loss of confidence in financial institutions by customers. In the chapter, the authors analyse whether and how the paradigm shift operation of insurance affects the mutual insurance companies. The authors verify the hypothesis that the formula of reciprocity allows mutual insurers not only easier to survive crises of confidence in financial institutions, but even improve their market position. To achieve the objective of the chapter, the authors analyse literature and the situation of mutual insurers in the European insurance market (with special emphasis on the countries of Central and Southern Europe).