Which statement about mutual insurance companies is true?

Which statement about mutual insurance companies is true?

• A. They are owned by policyholders
• B. They issue stock to raise capital
• C. They are not regulated by state insurance departments
• D. They do not pay dividends

Answer: (A)

Mutual insurance companies are owned by the people who hold their policies—policyholders themselves. Because there are no stockholders, all profits stay within the company to benefit policyholders, often returned as premium credits or dividends. They don’t issue stock to raise capital; instead, capital comes from premiums, investment income, and reserves. Like all insurers, they are regulated by state insurance departments. It’s not accurate to say they don’t pay dividends—any dividends would go to policyholders, not to stockholders.

Mutual insurance companies are owned by the people who hold their policies—policyholders themselves. Because there are no stockholders, all profits stay within the company to benefit policyholders, often returned as premium credits or dividends. They don’t issue stock to raise capital; instead, capital comes from premiums, investment income, and reserves. Like all insurers, they are regulated by state insurance departments. It’s not accurate to say they don’t pay dividends—any dividends would go to policyholders, not to stockholders.