Insurance companies can be organized under different ownership structures, each of which affects how they operate, how profits are distributed, and how policyholders interact with the company.
Mutual Insurer – A mutual insurer is owned by its policyholders rather than outside investors. Because policyholders are essentially members of the company, profits are not paid out to stockholders. Instead, any surplus earnings are typically returned to policyholders in the form of dividends or reduced premiums. Mutual insurers often emphasize long-term stability and policyholder benefits over short-term profits.
Stock Insurer – A stock insurer is owned by shareholders who invest capital into the company. Profits are distributed as dividends to shareholders, not directly to policyholders. Policyholders do not have ownership rights, but they still receive the insurance protection for which they paid premiums. Stock insurers often focus on profitability and shareholder value, and they may have greater access to investment capital than mutual insurers.
Fraternal Insurer – A fraternal insurer is a nonprofit, member-based organization, usually with a common religious, ethnic, or social affiliation. These insurers operate for the benefit of their members, who must typically belong to the association to purchase insurance. Fraternal benefit societies often provide insurance as well as social, charitable, or community services.
Reciprocal Insurer – A reciprocal insurer is an unincorporated group of individuals or businesses (called subscribers) who agree to mutually insure each other’s risks. Each member acts as both an insurer and an insured. A reciprocal is managed by an attorney-in-fact, who handles underwriting, claims, and administration on behalf of the members. Reciprocal insurers are particularly common among businesses or professionals seeking to pool risks in specialized markets.