What characterizes a mutual insurer?

A mutual insurer is characterized by being owned and governed by its policyholders. This structure means that the individuals who own insurance policies with the mutual insurer have a direct stake in the company’s operations and decisions. Policyholders cannot buy stock in a mutual insurer; rather, they have voting rights to influence how the company is run, including decisions about dividends, investments, and other operational matters.

In contrast to a stock insurer, which is owned by shareholders and operates with profit generation as its primary goal, a mutual insurer focuses on serving the interests of its policyholders. This may involve returning excess earnings back to them in the form of dividends or reduced premiums. The governance by policyholders often fosters a collaborative environment aimed at mutual benefit rather than individual profit maximization, which is essential in understanding the essence of mutual insurance.

Additionally, mutual insurers do not have capital stock like stock insurers do, reinforcing their unique governance structure that is distinctly oriented towards their policyholders rather than outside investors.