State RegulationsFL specificDifficulty 2/5
A Florida mutual life insurer earns more than expected and returns part of that surplus to its owners. Who receives the distribution?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under the Florida Insurance Code, a mutual insurer is owned by its policyholders, so surplus is returned to the policyholders as policyholder dividends or premium adjustments. There are no shareholders in a mutual company, unlike a stock insurer, where profits are distributed on capital stock.
Why the other options are wrong
- A) A mutual company has no capital stock and therefore no shareholders of record.
- B) Directors and officers govern the company but do not own its surplus in their corporate capacities.
- D) The guaranty association is an insolvency mechanism for failed insurers, not a recipient of dividends.
Memory hook
Mutual dividends go to the people who bought the policies.