The underlying principles of mutuals have not been of profit, but of cooperation and self help. This theme has endured for well over 100 years and continues to this day. In the beginning, the mutual policyholder was required to sign a premium note agreeing to assume certain liabilities of the company directly proportionate to the policyholder's limit of protection.

The general idea was to get a number of neighbours together for the purpose of sharing risk. Typically, buildings and chattels in those buildings were insured. When fire occurred, an assessment of whatever percentage was needed was levied, collected in due course, and paid over to the unfortunate one who had suffered the loss.
As the time passed, mutual companies were urged by regulators to adopt uniform methods to ensure safety of the company and justice to the individual policyholders. This gave rise to the adoption of a plan whereby companies would estimate future losses and cost of operation as a basis for rates. Under this system, levy on the premium note was only made when expenses exceeded the estimated cost for the year.

Gradually, mutual companies moved away from the assessment system in favour of collecting premiums in advance - however legislation required that the premium note remain in place for all policyholders of purely mutual companies until the formation of the Fire Mutuals Guarantee Fund in 1975.

The premium note was the financial backing of the mutual companies and served as a vital factor in their establishment and development. However, by the early 1970's it had become apparent that it would be in order to develop a better alternative. The result was the formation of the Fire Mutuals Guarantee Fund.

Again, through the theories of "strength in unity" and "neighbour helping neighbour" the mutuals entered an agreement whereby an open-ended fund was set up for the purpose of guaranteeing that all policyholders' outstanding claims and unearned premiums would be honoured in the event that any one of the mutuals could not honour its claims or outstanding policies. This fund is backed by each of the mutuals and the Farm Mutual Reinsurance Plan Inc., thereby placing the surplus of all member mutuals behind any one.