Mutual Insurance Company
What Does Mutual Insurance Company Mean?
A mutual insurance company is an insurance organization in which the policyholders are also the owners. This structure is designed to provide insurance protection exclusively for the policyholders, who typically have the right to elect the management personnel. Furthermore, as owners, the policyholders are entitled to a share of the company’s profits.
Insuranceopedia Explains Mutual Insurance Company
Since mutual companies are not traded on the stock market, there is no pressure for short-term gains. Their primary goal is to provide coverage to members at or near cost, as any dividends received by members represent excess premiums. However, because most of their funds come from premiums, this limits their ability to expand when necessary. In such cases, the company may choose to transition to being publicly traded on the stock market, a process known as “demutualization.”
