General Insurance PrinciplesQuestion 188 of 474
The structural difference between a stock insurer and a mutual insurer is that a mutual:
a.may write only life insurance and not property coverage
b.must be non-profit and may not retain any earnings at all
c.is owned by its policyholders, who may receive dividends
d.is owned by shareholders who elect the board of directors
Explanation
In a mutual, the policyholders are the owners, they elect the board, and any dividend declared is a return of unused premium rather than a payment on invested capital. The shareholder answer describes a stock insurer, whose dividends go to investors. Mutuals write property and casualty lines widely and do retain earnings as surplus to support their writings.
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