A mutual insurance society (MIS) is a legal entity in the form of a consumer cooperative, created for the mutual protection of its members’ property interests. Every policyholder is at the same time a member of the society, and the rules, contributions and payment procedure are determined by law, the charter and the decisions of the governing bodies.

Key difference: an ordinary insurance company sells policies to clients and assumes risk as a commercial organization, whereas an MIS brings together persons with similar risks to build protection jointly.

Legal basis

The activity is regulated by the Law of the Republic of Kazakhstan of 5 July 2006 No. 163 “On Mutual Insurance”. The law establishes the principles of equal rights and obligations of members, mutual protection and mutual liability.

The society insures the lawful property interests of its members that are united by identical or similar risks. The general terms are set out in the mutual insurance rules, which a prospective member must be able to read before joining.

How a society is created

An MIS is registered as a consumer cooperative. Its name must contain the words “mutual insurance society”. The charter defines the objectives, membership, governing bodies, the procedure for paying contributions, building up property and ending participation.

Unlike a joint-stock insurance company, the members of a society are not ordinary external clients. They make decisions through the general meeting and bear the obligations set out in the charter and the rules.

How funds are formed

  • insurance premiums of members under the contracts concluded;
  • entrance and membership fees, if provided for in the documents;
  • additional contributions in the cases established by the rules;
  • income from permitted investment of funds;
  • other receipts not prohibited by legislation.

If, at the end of the period, there are no arrears on payments, taxes and mandatory contributions, the general meeting may decide to reduce the next premiums or to suspend their payment temporarily. At the same time, a member should understand the risk of additional contributions, if the rules provide for them.

Insurance payments in an MIS

When an event provided for by the contract occurs, the beneficiary applies to the society and submits documents. Payment is made in the amount and in the manner established by the contract and the mutual insurance rules. As in ordinary insurance, what matters is the list of risks, exclusions, limits, the deductible and the notification obligations.

Which risks an MIS may not insure

Under the law currently in force, the activity of a mutual insurance society is not subject to licensing, but it is restricted. An MIS may not carry out insurance of civil liability or compulsory lines of insurance.

Important: compulsory insurance services are provided only by insurance companies that hold the relevant licence. A mutual insurance society cannot replace a licensed insurer when buying a compulsory policy.

Advantages of mutual insurance

  • members are united by a common interest and understand the specifics of the risk better;
  • an opportunity to influence the rules through the governing bodies;
  • costs and results are oriented towards protecting members, not outside shareholders;
  • flexibility for professional or industry communities;
  • an opportunity to build up specialized expertise.

Risks and limitations of the model

  • financial strength depends on the size and quality of the portfolio;
  • a large shared loss may affect many members at once;
  • the rules may provide for additional contributions;
  • narrow specialization increases risk concentration;
  • the quality of management depends on the activity and competence of members;
  • MIS status cannot be equated with the licence of an ordinary insurance company.

How to check a society before joining

  1. Verify the state registration and the full name.
  2. Check the information on the official page for insurance market participants.
  3. Obtain the charter and the mutual insurance rules.
  4. Study the financial statements, reserves and the loss settlement procedure.
  5. Find out the amount of all contributions and the conditions for additional funding.
  6. Check the reinsurance protection of large risks, if it is used.
  7. Find out the procedure for leaving and for the return of the funds due.

MIS or insurance company: what to choose

For a standard compulsory policy, the choice is possible only among licensed insurance companies. For voluntary protection of a homogeneous professional or property risk, an MIS may be a suitable option if its rules are transparent, its management is stable and its members are ready for mutual liability.

Archive list

A file with a list of mutual insurance societies was previously posted on the website:

Download the archive list: obschestva-vzaimnogo-strahovaniya.doc [187.5 Kb] (downloads: 122)

The file is preserved for historical reference. The current status of a society should be checked on the official page of the Agency for Regulation and Development of the Financial Market directly before joining or concluding a contract.

Summary

Mutual insurance lets members with similar risks build protection together and influence the terms. But membership requires a careful study of the charter, the rules, the contributions and the financial strength. An MIS does not provide compulsory insurance services and does not replace a licensed insurance company.