Insurance was not available in rural Canada or was not available at a reasonable price – 80% of the population then lived in rural Canada
Insurance contracts were not regulated - biased in favour of insurers
Rarely did insurers had to pay any claims
Insurance companies were based in England – thus contracts were written in English
French and German speaking farmers could not read, let alone understand insurance contracts written in English
Farmers were poor; low productivity; one farmer could not feed more than 100 people
Thus, when a loss occurred, neighbours would simply band together to rebuild the property and pay for the material
1835 – EARLY 1900’S
Enabling legislation was adopted and updated in Upper and Lower Canada
110 companies were formed in Upper Canada (Ontario)(Townships, then Municipalities)
300+ companies formed in Lower Canada (Quebec)(Parish mutuals)
Insurance built on trust
The Board of Directors knew every Insured; One look at the farm, 2 looks at the farmer
Being insured was a privilege – not a right
Insurance covered 50% of the value
Insurance paid for the material, labour was free
Insurance was offered at cost. Premium was paid after the year - covering losses, interest and administration
But, insurance contracts were not clear and were not consistently enforced
Some mutuals started creating 2 tier policyholders (Cash and Premium Note policyholders). They became federally incorporated
Stock companies from England and the US were charging at beginning of the year (Cash)
1900 – 1950
It was sometimes difficult to collect premium at the end of the year (1929 Depression)
A number of mutuals went bankrupt
Started charging premium at beginning of year coupled with the premium note system
Premium at beginning of year (5% of value) + up to 5% assessment as needed under the premium note
Regulator recognized that surplus was in hands + potential assessment
Started building surpluses with policy refunds when warranted
Clearer regulated contracts consistently enforced
1950 – TO DATE
As people were reluctant to buy insurance from insurers requiring the signature of a premium note, and as mutual insurers were not able to build a surplus sufficiently large, in the eyes of the regulator, to allow the abolishment of the premium note system, the regulator agreed that mutual insurers abolish the premium note system if they formed a Guarantee Fund;
To handle the sharing of too large risks, mutuals formed their Mutual Reinsurance Plan – a pooling/sharing of risks system;
Canadian Association of Mutual Insurance Companies
1000 McGarry Terrace, Unit / Unité M010, Ottawa, ON K2J 7A8
