What type of insurer is owned by its policyholders?

A mutual company is an insurer that is owned by its policyholders. This ownership structure means that the policyholders have a vested interest in the company and its performance. In a mutual company, profits are typically distributed to policyholders in the form of dividends or reduced future premiums, reflecting the idea that those who contribute to the company’s financial success should also benefit from it.

In contrast, a stock company is owned by shareholders who may or may not also be policyholders. The main focus of a stock company is to generate profits for its shareholders, which can lead to different priorities when making business decisions. Fraternal organizations and reciprocal exchanges also operate under distinct models not centered on policyholder ownership. Fraternal organizations are usually non-profit entities that provide insurance and other financial benefits to members of a specific social group, while reciprocal exchanges are unincorporated groups of individuals who agree to insure each other. In summary, the distinctive characteristic of a mutual company is its direct ownership by the policyholders, aligning their interests with the success of the company.