Mutual: The Value of Being a Shareholder In Your Insurance Company

When it comes to models for policyholders, mutual insurance companies are often viewed as the best. To fully understand the benefits of a mutual insurance company, it is first important to take a look at their history. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire is known as the oldest existing insurance company in the US, and it was a mutual insurance company. This entity was founded in 1752 by Benjamin Franklin. Mutual insurance companies were developed as a way to overcome the obstacle of not being able to find affordable and sufficient insurance coverage, which is still the case for many people today. 

What exactly is a mutual insurance company? 

If you choose to become a policyholder through a mutual insurance company, you will be investing in a company that is owned by you and the other policyholders; this is unlike other insurance companies that are owned by investors and/or shareholders. Most times, a mutual insurance company is a private entity -- either a corporation or business and is never traded on the open market. And because of this, they tend to be subject to fewer regulatory business oversight, especially when viewed in comparison to stock insurance companies. 

Consumers who purchase policies through mutual insurance companies readily testify the main benefit is being able to have a voice within the company; this comes as a result of being actual part owners in the companies. From policy decisions to the voting of management personnel, policyholders play a significant role in the overall functionality of the company. The products offered through this type of insurance company are generally very attractive in terms of features and affordability because key personnel understand the importance of keeping the majority of policyholders satisfied. Otherwise, these same key personnel people can be voted out if they don't offer affordable and attractive insurance products. 

Another major advantage of being a policyholder with a mutual insurance company is that capital will typically be returned directly back to the policyholders via dividends or premiums credits. Such credits can greatly lower your monthly premiums to a fraction of what they initially may start out to be. For example, if you have watercraft insurance in the amount of $26 a month but you receive a $12/month premium credit, this almost slashes your monthly watercraft insurance premium in half. 

Additionally, being a policyholder with a mutual insurance company means you will be gaining access to insurance products that are centered around the following three long-term goals:

  • Strategy
  • Risk appetite
  • Investment

A mutual insurance company does not have to concern itself with managing stock prices, which gives it the benefit of being able to have a higher percentage of invested assets, and although these invested assets in equities have historically been considered more volatile than investments of fixed income, the outcome usually generates higher returns.

The Takeaway

All in all, purchasing insurance through a mutual insurance company is a wise choice. Not only will you be buying policies through a company in which you are a part owner, but you will be harvesting the advantages of having your voice heard and receiving dividends and premium credits. Contact Sawgrass Mutual today to learn more about the benefits of mutual insurance.