The evolution of collective action business models: applications in fraternal benefit societies and Township Mutual Fire Insurance companies

Abstract

Fraternal benefit societies and township mutual fire insurance companies evolved from community-based mutual aid efforts in the 19th century. Both are similar in nature to commercial mutual insurance companies, yet they both incorporate a number of elements of collective action theory. As such, they are a combination of an insurance provider and a community organization.This dissertation examines the history, evolution and survival of fraternal benefit societies ("fraternals") in the United States and township mutual fire insurance companies ("township mutuals") in Minnesota from their inception to 2013. In addition to a managerial economics analysis of the industries in which they operate, this dissertation provides a quantitative analysis of the relative determinants of survival for firms in these industries. This analysis, which primarily takes the form of a survival analysis, includes business drivers, elements of collective action theory and environmental and social factors in addressing the question of what types of firms are most likely to survive and what must the leaders of these organizations focus on to ensure their continued survival. The primary conclusion of this study is that although firms in these industries have a number of factors that contribute to their continued survival, ultimately they must be run as businesses. In other words, although it is appealing to think of the sentimental aspects of collective action organizations, ultimately, and over the long term, economic considerations dominate the discussion of which firms in the industry survive the longest. In particular, in the case of fraternals, economies of scale, growth and customer retention are highly and significantly correlated with survival. In the case of township mutuals, profitability and market size are the covariates most correlated with longer survival.