What is the key characteristic of a mutual insurance company?

A mutual insurance company is characterized primarily by its ownership structure. Unlike stock insurance companies that are owned by shareholders, a mutual insurance company is owned by the individuals who hold its policies, known as policyholders. This structure means that policyholders can benefit from the company's profits, usually in the form of dividends or reduced premiums. Because policyholders have a stake in the company, their interests can often align more closely with the company’s long-term performance and stability.

This model encourages a sense of community and mutual benefit, as members are more likely to advocate for decisions that enhance their collective well-being. In contrast, other types of ownership, such as being publicly traded or owned by the state, do not share this defining characteristic of mutual ownership tied to the policyholders themselves.