South Carolina Personal Lines Practice Exam

Who are the owners of a mutual insurer?

1. Investors

2. Policyholders

3. Shareholders

4. Directors

The correct answer is: Policyholders

A mutual insurer is a type of insurance company that is owned by its policyholders. This means that the individuals or businesses that buy insurance policies from the mutual insurer also have ownership stakes in the company. Instead of being run for the profit of shareholders, a mutual insurer focuses on serving the interests of its policyholders, often providing benefits that can include lower premiums, dividends, or enhanced services. This structure contrasts with stock insurers, which are owned by shareholders who may or may not be policyholders and who typically aim for profit maximization. In the case of a mutual insurer, the policyholders participate in the governance of the company, often having the right to vote on significant company decisions, including the election of the board of directors. This member-driven focus aligns the company’s goals with those of its policyholders, highlighting the relationship between ownership and the insurance services provided. Thus, the correct identification of mutual insurer ownership speaks directly to the cooperative nature of these institutions, emphasizing the role policyholders play not just as consumers but as stakeholders in the organization.