Editors’ Note: Examining the historical record on Dutch mutual insurance from the sixteenth century to the present, Marco H.D. van Leeuwen suggests learning from this history. While acknowledging that mutualism might not “regain the importance it once had,” van Leeuwen suggests “it might well occupy a more prominent place. Indeed, we might well need the full panoply of a mixed economy of welfare in order to cope with the risks humanity faces today.”
Mutual insurance is one way to help offset the financial consequences of illness, unemployment, death, crop failure, plagues, droughts, or torrential rain. It can assume various forms: informal or strictly regulated; philanthropic or more insurance-based; top down or bottom up. Here, I focus on formal mutual insurance schemes, run not by the state or by a for-profit company, but by and for participants locally.
Such schemes have a long history, spanning at least five centuries in the West (Beito (2000), Cordery (2003), Emmery and Emmery (1999), Harris and Bridgen (2007)). But they exist in many parts of the globe (Van der Linden (1996) and LeMay-Boucher (2009)). In the West they have tended to faded from public discourse although still present especially among minorities (see Nembhard (2014) and Shenaz Hossein (2020)). Mutual insurance schemes have recently expanded again due to mounting dissatisfaction with private and state insurance (Vriens and De Moor 2020). In what follows, I specifically examine the historical record on Dutch mutual insurance from the sixteenth century to the present (Van Leeuwen (2016)). I explain how these mutual insurance groups have worked–their risks, organizational form, benefits, and conditions–why they have worked, and their significance in the mixed economy of welfare.
Since the sixteenth century in the Netherlands, guilds controlled much of the male urban labour market. They were associations of persons working in the same trade, such as bakers, with mandatory membership and rules and regulations on production. During the three centuries before their abolition in 1820, they also insured their members through a range of schemes, including payment for medical or burial costs, for lack of income when ill, and to support widows. From the late Middle Ages, guildsmen kept a vigil at a brother’s sickbed, were present at his funeral, carried his coffin, and provided for the widow. During the sixteenth century, these rituals began to be formalized in mutual insurance schemes.
The earliest Dutch health insurance funds were for those engaged in basic crafts and trades. A certain number of craftsmen were needed to justify setting up a separate mutual insurance fund and recruiting administrators. Over time, the numbers of funds grew, with at least 354 mutual schemes in existence in 1795, mostly operated by guilds. Guild insurance dealt with craftsmen, but also covered porters and some other semi- and unskilled workers. From the mid-eighteenth century, there were also mutual schemes outside the guilds, open to all, but these were short-lived. Guilds were part and parcel of the political economy of the Dutch Republic, enjoying a monopoly, profiting from certain taxes, and often constituting close-knit communities. Their sociability meant members knew one another well and could exert pressure if they suspected malingering. And it was no pleasure to be shamed in front of other members, who might well include friends and family.
From the mid-seventeenth century, insured guild members normally received between a third to a half of their normal earnings for each week that they were sick – just enough to enable their families to cope. Guild allowances were two to three times higher than those provided by charities but were also generally of shorter duration. Often guild members were co-insured for burial costs, a widow’s pension, or, much more rarely, for an old age pension. A master or journeyman could have multiple risks insured for just a few percent of his income. This sounded like a good deal, and it was, in fact, for those eligible to join.
There was always the spectre of adverse selection of ‘bad risks’ of course. Guilds tended to address that by making membership mandatory, ensuring both good and bad risks were included. Where membership was voluntary, there was usually a waiting period of six months, or even a year, in the case of burial insurance: an attempt to prevent the terminally ill from joining and their widows from claiming an allowance. Moral hazards, or malingering, were limited generally by having a claimant monitored by his brethren, who might visit him at home, but also by requiring a doctor’s certificate in the case of illness. Benefits could be cancelled where a recipient’s lifestyle was deemed the cause of his incapacity. And a waiting period of a week in the case of illness also helped to combat imagined diseases.
Guilds sometimes paid a higher allowance to a member, or his widow, than the regulations stipulated but they would not hesitate to cut the number of recipients or benefit levels if their reserves risked becoming exhausted. They could do the latter only if the majority of members agreed. That the guilds could offer insurance at all reflected their privileged relationship with the civic authorities, which not only required craftsmen to join a guild but also granted those guilds certain privileges, such as specific tax receipts which subsidized guild welfare. This backing by the authorities also helped early mutual insurers to establish their credibility, given the potentially long period between when members paid into the fund and when they reaped the benefits.
The nineteenth century was the golden age of the Friendly Society. Unlike guilds, these associations were no longer restricted to men working in a certain craft. They were also voluntary. Without mandatory membership, this meant ‘bad risks’ (those claiming more than contributing) could join as before, but this time ‘good risks’ could leave, which might lead to bankruptcy. Still, Friendly Societies were not entirely powerless in the face of such adverse selection, as they could screen before accepting a member and differentiate the level of contribution according to risk category. This meant that the elderly would pay more, for example. Furthermore, the mutuals retained the right not to pay out if a claim proved to be fraudulent. Solving moral hazards often took the form of close monitoring techniques or co-insurance, notably by means of a waiting period. As with guild schemes, the contributions paid to Friendly Societies were a very modest percentage of wages. Benefit levels were, again, much higher than charity, and avoided the shame that charity could imply. Like the guilds, Friendly Societies did not serve the male labouring underclass, nor women or those working the land.
Burial insurance schemes run by Friendly Societies expanded rapidly. Initially covering just a few per cent of the Dutch population, by the close of the nineteenth century they were almost ubiquitous, before quickly losing ground to commercial insurers. Health insurance grew in the nineteenth century, most notably through factory schemes and doctors’ funds. By 1900, insurers paid the medical bills of one-sixth of all Dutchmen. They also compensated one in twelve workers for loss of earnings. Health insurance continued to expand. National legislation enacted in 1940 making health insurance compulsory did not actually raise rates of coverage much: a similar proportion of the population had already been insured under voluntary schemes.
By then, a particular form of Friendly Society, organized by trade unions, had become popular. As trade unions grew, trade union mutualism expanded geographically and numerically. National trade unions were underrepresented among women and people living off the land, but they did manage to protect many male industrial workers, notably in the event of strikes and unemployment – arguably their core business – but also by providing sickness benefits, an allowance to cover burial costs, and smaller allowances for a host of other misfortunes. Their popularity in the Netherlands peaked in the first half of the twentieth century. The onset of state insurance had already tempted away the insured; once health insurance had become mandatory in 1940 and state unemployment insurance compulsory after the Second World War, trade unions effectively stopped being mutual insurers. The welfare state was successful in part owing to support from the unions, but it also effectively ended their insurance role, which in turn lead them to lose members.
In the Netherlands, mutual insurance groups have never been the sole provider of welfare. Instead, the country has been characterized by a mixed economy of welfare. Neighbours and family have always helped, and probably always will. However, Dutch historians think there was never a time in Dutch history when familial help predominated as the principal means for subsistence during sickness or other misfortunes. Familial assistance could easily be strained if help were needed for a prolonged period, was time-consuming, or costly.
For the early modern period, poor relief by the church and by civic bodies was the most common form of assistance (Van Leeuwen 2013). Each denomination in this religiously mixed country gave to its own members. In addition, in most places there was also a poor relief agency for those not helped by the church body, for example because they had not yet been a practicing church member in that locality long enough to qualify. This civic body was often independent from the municipality, but it was in contact with it. For church and civic bodies alike, income came from voluntary gifts, from the returns on their capital, and from subsidies from the municipality. Who was helped, for how long, and with what varied enormously. But in general, both civic and church relief agencies gave bread, sometimes money, peat for heating, and medical assistance if needed, to the elderly, widows, the sick, and underemployed large families.
Though organized on a voluntary basis–there was no general Poor Law as in Britain — Dutch charity was continuous in its existence (van Leeuwen 2012), even in years of crisis, massive in coverage, and could last years, longer in fact than support by mutuals. Charity was a low-lying safety net, operating in Dutch cities as well as in most of the countryside, helping more women than men. Guild relief was predominantly urban, middle class, and centred on male artisans and their families. During the nineteenth and twentieth centuries, Dutch charity lost ground, while Dutch mutualism expanded in covering the masses of the population. Yet it was not until the introduction of the General Allowance Act of 1965 that Dutch church-based charity lost its role as an institution of last resort for certain groups of the needy.
Today, charity by individuals, or foundations, is far from being a low-level safety net. Instead, it caters to certain special concerns among major donors or the public at large, and is less about providing welfare to Dutch citizens than supporting culture, sports clubs, and environmental issues within the Netherlands and abroad. However, during recent decades, Dutch charities–sometimes century old–have started again to help poor people in the Netherlands, mostly indirectly by providing subsidies for foodbanks, for organisations helping the homeless or assisting persons without legal residence who thus cannot receive state welfare.
While state schemes grew in the twentieth century, mutual insurance did not die out completely in the Netherlands. Mutual burial insurers continue to operate even today. Health insurance schemes with mutualist origins still exist, and some do contribute to community projects, but the insured are not in control in any meaningful way. The youngest generation of Dutch men and women have grown up with only a vague memory of the venerable tradition of mutual insurance that protected so many of their ancestors. In recent decades, the growth in the number of self-employed not covered by social insurance has prompted a modest but significant revival of mutualism, and at a relatively low cost compared with the premiums of commercial insurers. Since 2006, among the self-employed unprotected by state insurance, so-called Bread Funds have helped insure loss of income due to illness. These, too, operate locally, and their members know one another.
Apart from teaching “habits of thrift and economy”, mutuals had another effect. They were one of the main breeding grounds of what Alexis de Tocqueville in Democracy in America (1835-1840) termed “social democracy”, of the art of preparing and structuring a public debate, forming, expressing, and modifying arguments, persuading or dissuading, through participation in local civic organizations. This was useful not only for the specific causes debated; it was essential for fostering social movements and for political democracy as we know it today. Mutualism did not play a lone role in this but it was no less important than charities, reading clubs, sports clubs, and social movement organisations.
Given the present global challenges of environmental degradation, societal polarisation, economic stagnation, and a pandemic, we could do with a more mixed economy of welfare, with a somewhat larger role for philanthropy, mutual insurance, and other forms of mutual aid, alongside state and commercial insurance, and we could do with more conviviality and polite debate as well. That does not mean mutualism will regain the importance it once had, but it might well occupy a more prominent place. Indeed, we might well need the full panoply of a mixed economy of welfare in order to cope with the risks humanity faces today.
-Marco H.D. van Leeuwen
Marco H.D. van Leeuwen is professor of Social Science History at Utrecht University, and works on social solidarity and inequality world-wide from 1500 to the present. His research on social solidarity deals with INGOs, philanthropy, charity, and mutual insurance. More info at http://scholar.google.com/citations?user=Yvl_EKUAAAAJ&hl=nl or https://www.researchgate.net/profile/MHD_Van_Leeuwen
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