Stock Insurers| Mutual Insurers| Sample Insurance Assignment


Question 1

The essential features of the following categories of coverage are as follows:

Stock insurers: It is owned by the stockholders, offers some profit to the stockholders, has nonparticipating policies, have low rates, and majority of the shareholders have control of the company

Mutual insurers: Those who own policies have the power to elect the board of directors to conduct effective management. The policyholders stand a chance to receive rate or dividends reductions. The members have the right to return excess premiums

Loyd’s of London: The members who are new have legal liability, but it is limited. The members have to meet financial needs which are always stringent. Only specific or limited people within the jurisdictions are allowed to have Lloyd license

Reciprocal exchange: Insurance is exchanged within members who are known as subscribers. The integral members have the power to ensure other members. The reciprocals are limited in number because of the insurance limited lines (Hardy and Huebner,1919)

Question 2

Agent is an individual who has the power to represent in a legal way the principal and have got the authority to act on behalf of the principal. On the other hand, a broker is a person who can legally represent an insured person but on a commission basis which they receive from the insurers even though they do not have any power to bind the insurer (Hardy and Huebner,1919)

.Question 3

The key features of the following distribution systems in the marketing of property and casualty insurance.

  1. Independent agency system: A commission is given to the agents based on the business that they have produced that vary based on the line of insurance. Th agents have the power to adjust any small claims and offer loss control services for the insured.
  2. Exclusive agency system: There is only one insurer under the joint ownership. There are no renewal rights or expirations for the agents even though they are paid a commission rate that is lower based on their business renewal.
  3. Direct writer: In this case, the salesperson is employed by the insurer but not on an independent contract. There is compensation given to the employees based on an arrangement that has been made.
  4. Direct response system: The insurer has the power to sell directly to consumers through the media or another basis such as television.
  5. e. Multiple distribution systems: The insurers use the system to ensure mainly casualties and properties.

Question 4

The agency owns the policy expirations or the renewal rights to the business under the independent agency system while under the exclusive system the agent owns the policy expirations.

Question 5

The number of life insurers has declined sharply during the past decade because of the increase in company mergers and acquisitions, demutualization of insurers, and formation of mutual holding companies.

  1. Mergers and acquisitions among insurers are increased over time because of the valuation effects that are positive. On the other have the increased competition between financial institutions has increased caused an increase in acquisitions and mergers.
  2. Demutualization is a term that is being used to describe the process when mutual life insurance organization is being converted into a company that publicly trade stock that is owned by the shareholders.
  3. Some of the advantages of demutualization of a mutual life insurer are that they can purchase shares in a market that are open enabling them to generate capital. It is easy to conduct acquisition while at the same time enable the life insurer to attract a higher bid (Michelbacher & Mudgett, 1919).
  4. The mutual holding company is respective cooperative institutions that own stocks.


Hardy, E. R., Huebner, S. S., Michelbacher, G. F., & Mudgett, B. D. (1919). Insurance. New York: Alexander Hamilton Institute.