Mutual Insurance Company

What Does Mutual Insurance Company Mean?

A mutual insurance company is an insurance company whose policyholders are also the owners. This structure exists solely to provide insurance protection to the policyholders who often have the right to elect management personnel. Moreover, as owners, the policyholders are entitled to a share of the company’s profits.

Insuranceopedia Explains Mutual Insurance Company

As mutual companies are not traded on the stock market, there is no pressure for short-term gains. The goal is to provide coverage to the members at or near cost, given that any dividends the members receive represent excess premiums. However, since the majority of its funds come from premiums, that limits their ability to expand if needed. In such cases, the company may decide to switch to being traded on the stock market, which is called “demutualization.”