Question

Describe the differences between mutual and stock organizational forms of insurance companies.

Answer 1

Stock Insurance Company can be defined as a publicly traded company which is owned by its stockholders. Stock company can be earned by other stock companies or some specific mutual companies. The basic objective of a stock company is to specifically make profit for its stockholders. Policyholders does not directly share any profit or losses of the company. For operating as a stock Corporation, every ensurer is required to have a minimum capital and a specific surplus in hand Before any approval from state regulators.

Mutual Insurance Company are made for feeling and unique need of insurance. These type of company range from small scale local providers to National as well as International insurers. Some companies operating in this segment directly over multiple lines of coverage which includes property as well as casualty, health and life. Some other company focuses on specialised markets.
Mutual Insurance Company can be defined as a corporation that is directly owned by the policyholders which are also called contractual creditors. These contractual creditors have a specific Right to vote for the board of directors. These companies are generally managed and assets such as insurance Reserves, contingency funds or dividends are basically held for the protection in benefit of the policyholders and their specific beneficiaries. Management and board of directors determine about operating income that is paid out each and every year as a dividend to the policyholders.

P.S. - Please leave a comment if any explanation is needed.