What is a Mutual Insurance Company?

A mutual insurance company is a type of insurance company that is owned by the people who have insurance policies with them. The main goal of a mutual insurance company is to offer insurance coverage to its members and policyholders, and these members have the authority to choose the management. Mutual insurance companies invest in portfolios similar to regular mutual funds, and any profits made are given back to the members in the form of dividends or lower premiums. Whether an insurance company can be considered a mutual insurance company is determined by federal law, not state law

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It aims to offer insurance coverage to its members at a low cost. If the company makes profits, it gives back to members through dividends or lower premiums.

Mutual insurance companies do not trade on stock exchanges, so they can focus on long-term benefits for their members without the pressure of meeting short-term profit goals. They tend to invest in safer, low-yield assets. However, since they are not publicly traded, it may be challenging for policyholders to assess their financial stability or understand how dividends are calculated.

Big businesses can create a mutual insurance company for self-insurance. They can do this by merging departments with different budgets or by partnering with other companies in the same industry. For instance, a group of doctors might join forces to improve their insurance coverage and reduce premiums by pooling their resources to cover similar risks.


Mutual insurance originated in England during the late 17th century to provide coverage for fire-related losses. In 1752, Benjamin Franklin founded the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire, marking the beginning of mutual insurance in the United States. Today, mutual insurance companies can be found in almost every corner of the globe.

Over the last two decades, the insurance sector has experienced significant transformations, especially following the deregulation in the 1990s that allowed insurance companies to collaborate more with banks. This led to a rise in demutualization as mutual companies sought to expand their business beyond insurance and secure additional funding.

Some companies switched to being owned by stockholders, while others created mutual holding companies owned by policyholders of a converted mutual insurance company.


A mutual insurance company is different from a regular insurance company in that it’s owned by its policyholders, not investors. This means that any profits the company makes are either reinvested in the company to benefit policyholders in the long run, or distributed back to them directly in the form of dividends or lower premiums. In short, with a mutual insurance company, the policyholders are the owners and the beneficiaries.