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Questions and Answers
What is a multi-line insurer?
What distinguishes a stock insurance company from a mutual insurance company?
Who are the owners of a mutual insurance company?
What is the process of converting a mutual company into a stock company called?
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What are dividends paid to policyowners by mutual insurers referred to as?
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How do stock insurance companies manage their earnings?
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What type of policies do mutual insurance companies issue?
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Which aspect is NOT a characteristic of stock insurance companies?
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What defines a monoline insurer?
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In what scenario can a stock insurance company be called a mixed plan company?
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Study Notes
Private Insurance Companies
- Private insurance companies offer various lines of insurance, including life, health, property, and casualty insurance.
- Companies can sell one line of insurance (monoline insurer) or multiple lines of insurance (multi-line insurer).
Stock Insurance Companies
- Stock insurance companies are private organizations structured like corporations, with the goal of making a profit for shareholders.
- Stockholders may or may not be policyholders, and dividends are paid to stockholders when declared.
- Directors and officers are responsible to stockholders, not policyholders.
- Stock companies issue nonparticipating insurance policies, which do not allow policyholders to participate in company profits or elect the board of directors.
Mutual Insurance Companies
- Mutual insurance companies are organized and incorporated under state laws, with policyholders as the owners.
- Policyholders have the right to vote for members of the board of directors and participate in dividends.
- Mutual companies issue participating policies, which allow policyowners to share in company earnings (divisible surplus).
- The divisible surplus is the amount of earnings paid to policyowners as dividends after setting aside funds for reserves, operating expenses, and business purposes.
Conversion between Stock and Mutual Companies
- A stock company can convert into a mutual company through mutualization.
- A mutual company can convert into a stock company through demutualization.
- In rare cases, a stock company may issue both participating and nonparticipating policies, known as a mixed plan.
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Description
This quiz covers private commercial insurance companies, including multi-line and monoline insurers, and the types of insurance they offer.
