As the welfare state retreats, how will we pay for the costs of illness, disability, unemployment, old age, death, and burial? Will we have to turn to family, friends, or charities for support? Will we be able to afford, or even access, insurance from commercial providers? In this interesting and well-documented study of four centuries of mutual insurance, Marco van Leeuwen contends that mutualism can be part of the solution in the new mixed-welfare economies that are reemerging in the West.
Despite its title, this book is essentially a history of mutual forms of insurance in the Netherlands, with some comparative discussion of friendly societies in nineteenth-century Britain and microburial and health insurance in developing countries such as Tanzania and Ethiopia. Nevertheless, the variety and complexity of insurance schemes in the Dutch mixed economy of welfare allows van Leeuwen to draw broad lessons about what mutual insurers can bring to the challenge of providing welfare in the contemporary world. Indeed, one of the innovative features of this book, and one of its strengths, is the author's deliberate conflation of the terms “mutual” and “micro” insurance, which helps him argue for long-run continuities between the two.
The central questions—How did microinsurance work? Why did it work? Can it still work today?—are pursued through four chronological chapters plus an extensive conclusion that discusses the principles and practices of mutual insurance. Each chapter presents data on the number of funds; their longevity, membership, and capital assets; the percentage of population or labor force insured; levels of benefits paid as a proportion of wages or a multiple of poor relief; and conditions of payment, as well as other tables on, for example, working-class household budgets, mortality rates, life expectancy, and the epidemiological transition. Chapter 2 charts the types of insurance schemes operated by urban guilds in the Dutch Republic from the sixteenth century to their final dissolution in 1820. Guild benefits were several times higher than poor relief, although their duration and level could be adjusted according to the fund's financial strength. Adverse selection was reduced by compulsory membership sanctioned by town corporations. Moral hazard was controlled by devices such as waiting times imposed on new members before they were entitled to benefits and by extensive sociability. Van Leeuwen argues that while poor relief integrated the poor into oligarchic urban society, guild welfare did the same for the disenfranchised middle classes.
Chapter 3 examines the rise of friendly society insurance during the nineteenth century and the growth of commercial insurers. Improvement in the standard of living was accompanied by a transition to welfare for a broader section of the population. By 1890, for example, over half the Dutch population was insured by a burial fund (p.101). With better communications and transportation, the monitoring of large pools of risk became easier, economies of scale came into effect, and the competitive gap between local mutuals and big commercial insurers narrowed. Nevertheless, van Leeuwen argues, there was no sharp discontinuity between the guild mutualism of the eighteenth century and the voluntary mutualism of the nineteenth. As the advocates of state insurance became more influential, their targets were not those risks insured by mutuals but rather the types of risk—notably, old age and industrial accidents—that the mutuals did not cover.
Chapter 4 analyzes the microinsurance provided by Dutch trade unions from the 1900s to the 1960s. Like the guild and voluntary funds of previous eras, union insurance schemes employed devices such as waiting periods, self-insurance, and close monitoring to combat adverse selection, moral hazard, and correlated risks arising from cyclical or structural unemployment. Van Leeuwen suggests that insurance was one of the motives for joining a union, especially in periods when the risk of unemployment was high. Social insurance in the Netherlands, beginning with the Industrial Accidents Act of 1901, was extended slowly at first and then more rapidly after World War II. The decline of trade union membership from a peak in 1950 coincided with the greatest expansion of state welfare. Unions had favored state involvement from the outset, provided they controlled the schemes, but as regulation by the Ministry of Labour became more rigorous and state coverage grew, administrative costs rose and trade unions withdrew from much insurance provision.
The General Income Support Act of 1965, which established relief as a legal right for all citizens, was the high-water mark of the Dutch welfare state. Within a decade of the act it was clear that state welfare had become too expensive. As the population aged and economic growth slowed, welfare provision was generating a demand of its own. From the 1970s, in a process still ongoing, social security legislation became more stringent and benefits more restricted, while wealth inequality and poverty levels rose. A large part of the Dutch labor force with no fixed income increasingly struggled with inadequate insurance. One recent solution has been the mutual “Bread Funds” (Broodfonds) organized by groups of self-employed persons to compensate members for loss of income when ill. According to van Leeuwen, Bread Funds demonstrate the advantages enjoyed by small-scale organizations with democratic and high-trust governance systems in reducing the moral hazards that plague their larger for-profit counterparts. That said, he concludes that no single solution to the contraction of the welfare state is likely to suffice entirely. The full array of the mixed economy of welfare might well be needed, but within this there is scope for revising and expanding both historic and novel forms of microinsurance.
