A mutual insurance company is an insurer that provides collective self-insurance to its Members. It has no shareholders and is owned and controlled by its Members. By pooling their risks together in a mutual insurance company, Members are able to take control of the extent of their insurance cover and obtain their insurance cover at cost. Mutual insurance companies do not have external shareholders taking profits out of the business in the form of dividends. Any surplus produced by the operating activities of a mutual insurer is applied for the sole benefit of its Members. Show
The executive management of mutual insurance companies is usually outsourced to a management company, which provides all the services required to run a regulated insurance company under the supervision of the company’s board of directors. You are currently offline. Some pages or content may fail to load.
Being a member-owned company - also called a mutual - gives us greater flexibility to invest money into the services and solutions that matter most to our members, customers and the Australian community.
A privately-held insurance company that is 100% owned by its policyholders A mutual insurance company is a privately-held insurance company that is 100% owned by its policyholders. Mutual insurers are established with the sole purpose of providing its members with insurance coverage.  Mutual insurance companies are unique because the policyholders select management, and any profits are either reinvested into the company or paid out to policyholders in the form of a dividend. Like other insurance companies, mutual insurance companies make investments to meet the cash flow demand from its policyholders. History of Mutual Insurance CompaniesThe mutual insurance company concept originated from 17th century England when individuals sought coverage due to loss from fires. However, the mutual insurance industry officially began in the U.S. in 1752 when Benjamin Franklin founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Today, mutual insurance companies are in practically every country in the world. Understanding Mutual Insurance CompaniesMutual insurers continued to grow since their creation, due to several factors, including: 1. Overall goalMost insurance companies aim to maximize profits, but the overall goal of a mutual insurance company is to provide insurance coverage to policyholders at or near cost. When profits are generated, they either pay the policyholders a dividend or reinvest the profits into the company. 2. Investment strategyMutual insurance companies maintain a certain level of capital to meet the needs of policyholders, so they have a much longer investment view. As such, they usually invest in lower-yielding conservative investments. It is worth noting that because mutual insurance companies are privately held, it is usually difficult to determine the solvency of the company. 3. Income sourceThe main source of income for a mutual insurance company is the insurance premiums that policyholders pay for coverage. Due to the nature of the business, they are restricted in their ability to diversify income sources. There is another critical mechanism that is built into a mutual insurance company if the company selects to go public – demutualization. Demutualization is the process in which policyholders become shareholders, and the company begins to trade on a public exchange. When a mutual insurance company converts to a stock company, they enjoy greater flexibility and access to capital, which allows them to grow more rapidly. Stock vs. Mutual Insurance CompanyThere is also something called a stock insurance company, which is a company that is solely owned by its shareholders. Both companies offer insurance, but there are some differences that make each very distinct from each other. They include: 1. Goal of the companyThe main goal of a mutual insurance company is to maintain enough capital to meet the needs of its policyholders, while the goal of a stock insurance company is to maximize profits for shareholders. 2. Ownership of the companyMutual insurance companies are solely owned by policyholders, while stock insurance companies are owned by shareholders. In a stock insurance company, policyholders have no control over the company’s management. 3. Earnings distributionBoth mutual and stock insurance companies usually provide some form of distribution; however, the distributions are structured somewhat differently. In a mutual insurance company, distributions can either be used to pay policyholders so they can reduce future premiums or be reinvested into the company. In a stock insurance company, distributions can either be paid to shareholders, used to pay down debt, or be reinvested into the company. 4. InvestmentsSince the objectives of stock and mutual insurance companies are different, their approach to investment is slightly different. A stock insurance company is consistently under pressure to maximize profits for shareholders, so they tend to pay attention to short-term results. As such, they will usually invest in higher-yielding, riskier assets. On the other hand, a mutual insurance company is more long-term focused, which usually leads them to invest in more conservative assets. 5. Risk toleranceStock insurance companies offer policyholders greater stability because more options are available to them to generate earnings. In contrast, a mutual insurance company heavily relies on policy premiums as their main source of income. Examples (in Canada)There are several mutual insurance companies in Canada, and the industry continues to thrive in such a financial environment. The three largest, by market share, include:
Globally, there are about 400 mutual insurance companies, including 62 in Canada. Additional ResourcesCFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful: A mutual insurance company is an insurance company owned entirely by its policyholders. Any profits earned by a mutual insurance company are either retained within the company or rebated to policyholders in the form of dividend distributions or reduced future premiums. In contrast, a stock insurance company is owned by investors who have purchased company stock; any profits generated by a stock insurance company are distributed to the investors without necessarily benefiting the policyholders. HistoryThe concept of mutual insurance originated in England in the late 17th century to cover losses due to fire.[1] The mutual/casualty insurance industry began in the United States in 1752 when Benjamin Franklin established the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire.[1] Mutual property/casualty insurance companies exist now in nearly every country around the globe.[2] The global trade association for the industry, the International Cooperative and Mutual Insurance Federation, claims 216 members in 74 countries, in turn representing over 400 insurers.[3] In North America the National Association of Mutual Insurance Companies (NAMIC), founded in 1895, is the sole representative of U.S. and Canadian mutual insurance companies in the areas of advocacy and education.[4] Recent developments in the United StatesThe "mutual holding company" structure was first introduced in Iowa in 1995, and has spread since then.[5] There have been concerns that the mutual holding company conversion is disadvantageous for the owners of the company, the policyholders.[6] The major disadvantage of mutual insurance companies is the difficulty of raising capital.[7] In the 111th Congress, Carolyn Maloney sponsored a bill that she claimed would have protected mutual holding company owners. The measure, H.R. 3291, died in committee.[citation needed] Mutual holding companies are one way to undergo privatization, also called demutualization. List of mutual insurance companiesMultinational
Bermuda
Canada
Denmark
Faroe Islands
Finland
FranceGeneral Mutual insurance companies
Health insurance companies
Germany
Japan
New Zealand
Philippines
Slovenia
South Africa
Spain
Sweden
United Kingdom
United States
References
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Who is a mutual insurance company owned by?
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