General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In a mutual insurance company, the owners of the company are the:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
A mutual insurance company is owned by its policyholders, who are also its members. Profits are returned to policyholders through dividends, which represent a return of premium or a share of the surplus. A stock insurance company, in contrast, is owned by stockholders, and policyholders are customers rather than owners. This ownership structure affects how the company is governed, how profits are distributed, and how it raises capital for growth, and it is a basic fact about insurer types that appears on the exam.
Why the other options are wrong
- A) Stockholders own a stock insurance company, not a mutual company. Stockholders own stock insurers, while mutual companies are owned by their policyholders.
- C) The board of directors manages the company. In a mutual, the board is elected by the policyholder-owners. The board manages the company but answers to the policyholder-owners who elect it in a mutual.
- D) The Commissioner regulates insurers but does not own them. The Commissioner supervises and regulates insurers but holds no ownership interest in them.
Memory hook
Mutual = customers are the shareholders. Dividends to policyholders are a return of their own surplus.