State RegulationsTX specificDifficulty 1/5
In a Texas mutual insurance company, who owns the company and has the right to elect its board of directors?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under the Texas Insurance Code provisions governing the organization of stock and mutual insurers (Texas Insurance Code Chapters 547 and 801), a mutual insurance company has no capital stock and is owned by its policyholders, who are members entitled to vote for the directors who manage the company. Control of a mutual therefore stays with the people insured rather than with outside investors. For a Texas applicant, buying from a mutual means buying from a company his or her own membership controls.
Why the other options are wrong
- B) Shareholders own a stock company, not a mutual; a mutual has no capital stock to purchase.
- C) Agents sell and service policies; they hold no ownership or director-appointment rights in a mutual.
- D) The Commissioner regulates solvency and market conduct but does not appoint the directors of a mutual insurer.
Memory hook
Mutual means members; stock means shareholders.