Mutual Insurance Company
An insurance company that is collectively owned by its members or insurers is termed as a Mutual Insurance company. As a policy holder of a mutual insurance company you have the right to exercise some extent of managerial control over the company. Here, high quality services are offered to the policy holders at the lowest possible prices due to the transparency of operation and the company’s long-term vision.
Best return values
Mutual insurance companies do not sell their shares in the share market, so they can avoid setting targets for short-term profits. Also these companies gain their primary source of income from the premiums paid by the policy holders. So if the total losses and expenses are lower than the collective premiums paid by all the investors, then the gain is shared with the investors. It can be shared in the form of dividends or as reduction in premiums that is to be paid in the future.
Pros and Cons
One of the biggest advantages of Mutual Insurance Company is that, the policy holder can choose between his desired management professionals and policy statements. Policy holder can also prohibit disadvantageous decisions of the management.
The disadvantages include the lack of capital as the company operates on a self-sufficient fund. Also the dividends can be declared by the policy holders only at the end of the financial year.
