The Moral Justification of Surplus - Redefining the Social Meaning of Mutual Insurance in Sweden (1945-2015)
Moral philosophers have challenged neoclassical economists by suggesting that the perception of profit as good or bad may depend on how profit is generated (through hard work or luck), the type of market or exchange in which it is produced (contested or uncontested), its amount (normal or supernormal) and finally its destination (private or collective) (Cowan and Rizzo 1995). In the past decade, the study of the social meaning of money (Zelizer 1994) has taken a turn and the view of “moralized markets” has become a vital point of departure to study how the morality of markets is socially constructed (Fourcade and Healey 2007). Drawing on a unique longitudinal case study of the Swedish mutual insurance company Folksam, this paper adopts an institutional approach to analyze its moral justification of surplus, emphasizing the period 1945-2015.
Three aspects make the case of Folksam particularly relevant when aiming to theorize the moral justification of surplus. First, insurance is a morally contested good and we learn from the history of the insurance industry that cultural work performed by insurance actors is crucial in legitimizing the trading of this fictive good (Polanyi 2001 , Zelizer 1978). In the case of life-insurance, for example, it was the emphasis on the endowment of a “good death”, i.e. “the wise and generous economic provision of dependents” that provided a moral justification for its initial acceptance (Zelizer 1978:603). Second, the case of Folksam offers a rare opportunity to follow the cultural work performed by the same corporate actor through 70 years and several transformative regime shifts. Third, the case of Folksam is relevant as it focuses on a particular organizational form; the mutually owned enterprise. The mutual is a hybrid form of organization (Battilana & Lee 2014) in the sense that it is collectively owned by its policyholders/customers who are also its members. A fundamental difference between mutual and limited insurers is thus that mutuals have to use their surplus exclusively for the “mutual benefit” of their members, since they have no shareholders (AMICE, 2015). This, in turn, makes it necessary for the mutual to establish a balance between profit maximization (a typical interest of owners) and high-quality service delivery (a typical interest of customers) (Spear, 2004). In recent decades of increasing demutualization, the moral justification of profits has become no less than a matter of survival for the remaining mutuals in today’s insurance markets (AMICE, 2015).
Using a mixed methods and multi-disciplinary approach (economic sociology, business studies and economic history), we recently accessed and begun to analyze a unique and rich archive material at the FolksamHQ, a material composed by annual reports, board’s and shareholders’ meetings minutes, reports by special commissions related to the handling of surplus as well as customer brochures, press releases, official reports of the Swedish government and previous studies on Swedish mutual insurances and related societal discourses.
First rounds of analysis of the collected data have provided us with a clear picture of the major historical moments and regime shifts on which to focus our attention.
From the start, 1945, Folksam had a mission to combine the best possible insurance coverage with “the support of the cooperative movement’s development and cultural and other efforts that serve the interest of the broad masses” (Folksam 2008:18). The years between 1945 and 1975 were the years of the so-called “golden era of Scandinavian welfare capitalism” (Esping-Andersen 1990) and of the regulated market society (Polanyi 2001 ). During this time, the Swedish insurance industry was affected by strict regulation while, at societal level, institutionalized discourses focused on the key values of democracy and citizens’ participation (Larsson et al. 2005, Gustavsson 2014). Many top managers of insurance mutuals were representatives of the Social Democratic movement and the vocabulary and underlying logics used by these companies seemed to perfectly match those of the political regime of the time.
The conservative revolution of the 1979-80 that took place in the US and Britain brought along a regime shift in Sweden as well. This shift was characterized by neo-liberal logics, a strong influence by globalizing forces and so called “de-regulations” in the markets (Piketty 2014). During the years 1984-1999, the Swedish insurance industry went through a process of de- and re-regulation when the payment of dividends to policyholders became forbidden by law. Societal discourses during this period focused on the key values of an expanding market economy (Larsson et al. 2005, Gustavsson 2014) and mutual insurers became an increasingly odd species with a confusing and challenged organizational form. Many companies were demutualized. Since 2000 up to the present, the private insurance industry has been characterized by an increased self-regulation as well as government regulation drawing on key values such as integrity, fairness and transparency (Larsson et al. 2005, Gustavsson 2014).
When following the cultural work performed by Folksam over time, we find that its moral justification of surplus has involved the association of surplus to different recipient categories such as the Social Democratic movement, the policyholder collectivity, the individual policyholder and external parties. By doing so the company has isomorphically adapted (DiMaggio and Powell 1983) to the ideology and vocabulary of each regime (tentatively labelled movement, collectivist, individualist and global). As an illustration, the individual recipients have been addressed differently in different times (“owners”, “members” “customers”) following shifts in regimes. In addition, we find that surplus has been consequently channeled into morally good social activities and causes of the time (such as sports associations, traffic security and in the last years the environment and global sustainability). And lately, Folksam has taken active part in branding the organizational model of the mutual as a particularly “good” one, and possibly the only one capable of offering a morally viable insurance deal today.
*authors' names are listed in alphabetical order