1.4

Question 1

A _________ insurance company is a private insurance company that is established to provide insurance to policyowners who are also the company’s stockholders (owners).

Answer 1

Mutual

Question 2

A Mutual insurance company is considered to be a ______________ company because it issues ‘participating policies’ in which policyowners share in the company’s ownership and receive dividends from the earned surplus of the company’s profits.

Answer 2

Participating or Par

Question 3

Individuals who purchase insurance from a mutual insurer are both a customer (insured) and an owner (shareholder). The insurer’s __________ is paid out to its shareholders in the form of ___________, which are an annual reimbursement of excess premiums that remain after the company has set aside its needed reserves and has deducted the necessary amount to cover annual claims and other company expenses.

Answer 3

Earned Surplus

Dividends

Question 4

A mutual insurance company has the ability to change its corporate structure to a stock company status, often to help increase capital needs that is more easily accomplished as a stock insurance company. This process is called _______________.

Answer 4

‘de-mutualization.’

Question 5

Just as a mutual insurance company can ‘de-mutualize’, a stock insurance company can also change its corporate structure to become a mutual insurance company, a process called ______________.

Answer 5

‘mutualization.’