A primer on mutual insurance companies

Image source: nearsay.com

Mutual insurance companies are governed by overarching federal law, and they exist to provide insurance coverage for members and policyholders. In this setup, members have the right to select the management. In short, a mutual insurance company is owned by its policyholders.

This type of insurance guarantees that promised benefits can be paid over the long term; policy owners are better protected from aiming simply for short-term profits since mutual insurance companies are not tradeable on stock exchanges. To maintain their existence, these insurance companies take a large percentage of their funding from member premiums.

Image source: budgeting.thenest.com

Mutual insurance companies are now common all over the world, gaining more members who have the right to excess premiums, meaning they are given an assurance of receiving dividend payments or reduced premiums in case the insurance company gains losses. Today, as a way of gaining self-insurance, many large companies everywhere are forming their own mutual insurance companies by teaming up with similar businesses that have separate budgets.

There have been major changes in the insurance industry in the last two decades, including demutualization and conversion of certain companies into stock ownership. Yet mutual insurance companies endure because they maintain the goal of providing members coverage at cost or near it.

State Mutual Insurance was established in 1936. As a legal reserve mutual insurer, it provides Medicare subscribers supplementary health insurance coverage. For more reads on insurance policies and their benefits, go to this blog.