State RegulationsTX specificDifficulty 3/5
Which of the following is a characteristic of a Texas mutual insurer but NOT of a Texas stock insurer?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under TIC 547.001 and TIC 801.001, the stock/mutual line is drawn by ownership and control. In a mutual insurer the policyholders are the members: they elect the board of directors and any divisible surplus is returned to them as policy dividends. A stock insurer has no such member control, because the shareholders elect the board and take the profit. For an agent, this is why a mutual company illustration may show dividends while a stock company's nonparticipating illustration cannot promise them.
Why the other options are wrong
- A) That is the stock company structure, a for-profit corporation whose profits run to its shareholders rather than to its policyholders.
- B) A lodge system and representative form of government are requirements for a fraternal benefit society under TIC 885.001-.706, not for a mutual insurer.
- C) Limiting the owner's exposure to contributed capital describes the shareholders of a stock company; mutual policyholders are not capital contributors in that sense, so this is not a mutual-only feature.
Memory hook
Mutual means the customers are the owners: they vote and they share the surplus.