1.5.1 Stock Insurers
Stock insurance companies are private organizations with the same structure as any corporation, organized and incorporated under state laws for the purpose of making a profit for its owners, the stockholders.
A stock insurer is a publicly-traded insurance company that is owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary for the issuance of guaranteed, fixed premium, nonparticipating policies.
Stock insurers are characterized by the following features.
- Nonparticipating policies
- Owned by stockholders
- Provides profit to stockholders
- Majority stockholder controls company
- Lower rates
Stock insurers are incorporated insurers whose capital is divided into shares. Stock insurance companies are owned by the stockholders who are responsible for electing the firm's board of directors. Dividends are paid to stockholders and are considered taxable income. Regardless of whether stockholders are or are not policyholders, the directors and officers of the corporation are responsible to all the stockholders in the company.
When a stock life insurance company issues both participating and nonparticipating policies,* it is referred to as a company doing business as a mixed plan.
What is the difference between a participating and a nonparticipating life insurance policy?
Mutualization occurs when a stock company becomes a mutual company. Mutualization is the conversion of an insurer's corporate ownership from a stock company to a mutual company by buying back all the shares of stock and retiring them.
