A stock owned insurance company must keep their stock holders happy. There are no stock holders in a mutually owned insurance company. Why does that matter? The stock insurance companies have incentive to take risks, they are therefore vulnerable to the pressures of maximizing short term quarterly profits in order to please stock holders. Oh and any dividend gains the stock holders receive are of course taxed.
The executives of a Mutually Owned Insurance Company have a totally different mindset though. They answer to their shareholders who are their policy holders. Their focus is to guarantee maximum benefits to the policy holders and are not pressured to take risks to maximize short term profits. This allows management to always have in mind the long term safety, security and return for you the policy owner & shareholder.
The policy holders actually own a share of the company and so partake in the profits of the company as well. Any dividend gains the policy holders receive are tax free because they are considered a return of premium. A return of an overpayment of premium. The stock company policy holders were over charged also, but to the benefit of the stock holders not the policy owners.
The largest disadvantage is demutualization. Demutualization occurs when a mutual insurance company chooses to become a stock insurance company. This can occur when the mutual insurance company needs to raise capital for business growth or to cover higher than expected losses. In recent years, there have been many cases of demutualization that have led to many mutual insurance companies being acquired by larger companies after the company went public.
Let Bennett Insurance Group help when you are considering your needs for insurance products for your home or business. Contact us at 623-979-4140
Presented By:
Jim Bennett
Bennett Insurance Group
623-979-4140
http://jimbennettinsurance.com
jim@jimbennettinsurance.com
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