What is a characteristic of a mutual insurance company?

A mutual insurance company is characterized by its ownership structure, specifically that it is owned by policyholders. This means that individuals who purchase insurance policies from a mutual company have a stake in the organization. They participate in the governance of the company, often having the right to vote on important matters, such as electing the board of directors. The profits generated by the mutual insurance company are typically shared among the policyholders in the form of dividends or reduced premiums, rather than being distributed to stockholders, as would be the case with a stock insurance company.

The essence of mutual insurance lies in the collective pooling of risk and the alignment of interests between the company and its policyholders, which is a fundamental aspect of its operation and purpose. Therefore, policyholder ownership is a defining characteristic of mutual companies, distinguishing them from other insurance entities that are structured differently.