November 1, 2019

Property and Casualty Insurance: Understanding the Difference Between Mutual and Stock Insurance Companies

At this moment, you may not know what type of company your current insurer is; however, knowing the difference between mutual and stock insurance companies can help you decide if a company is a good fit for you!

If you have more questions, you can always talk with your insurance broker and visit a company website to learn more about an insurer. Read on for five aspects that differentiate the two types of companies.

Foundational Purpose

The primary purpose for both mutual and stock insurance companies is to provide policyholders with insurance to protect their farm, business, and home. But mutual insurers are fundamentally different from stock insurers.

The founding purpose of mutual insurance companies is to support its members; members are the driving force.

The driving force of stock insurers is their shareholders.

The differing foundational purposes create each company’s strategic road map. Chuck Chamness, President and CEO at NAMIC, explained the difference poignantly,

“Describing mutual insurance companies as underperforming in comparison to stock insurance companies […] can be like saying that marathon runners “underperform” sprinters. Just as the objectives for both are different, so are the attributes of performance and the definitions of success.”

Understanding the attributes and definitions for success can help you, the policyholder, understand much more about your insurance company.

Ownership and Leadership

Policyholders of a mutual insurer can be elected to its Board of Directors. Together, policyholders own a mutual insurance company and may elect the board of directors and vote for resolutions that affect the company.

Stock insurers may be privately held or publicly traded on a stock market. This type of company is owned by shareholders. Policyholders do not play a part in electing directors or voting on resolutions unless they are also shareholders.

Company Profits

All insurance companies earn income by collecting premiums from policyholders. At the end of the year, a calculation is made by subtracting the claims incurred and the expenses from the total insurance premiums collected. This calculation determines if the company operated that year at a loss or with a profit.

A mutual insurance company will usually give surplus profits back to members through a premium refund.

Stock companies typically distribute surplus profits to shareholders as dividends or invest it back into the company.


Investment choice further highlights the foundational purposes for the two company types. Mutuals focus on long term goals and invest for the future by taking a generally conservative investment approach and preserving investment capital. For stock insurers, there is often a push to maximize profits for shareholders, so the company is more likely to focus on higher risk and higher yield investments.


Insurance companies operating in Canada must carefully follow federal and provincial legislation to prevent the risk of insolvency (being unable to pay company debts and/or policyholder claims). In the very unlikely event of an insurance company falling into bankruptcy, policyholders are protected by the Property and Casualty Insurance Compensation Corporation (PACICC).

Some of the ways that mutual insurance companies minimize risk and protect policyholders is through careful investments and local expertise in writing insurance.

Large stock insurers are able to minimize risk by using their scale i.e. the sheer size of their company. Interestingly, smaller stock companies that are privately held will minimize risk just like a mutual.

Mutual Fire Insurance is a mutual insurance company. We are structured as a dual policyholder company meaning policyholders can choose to become members. Learn more about the mutual advantage and benefits of becoming a member at MFI. We are members of both the Canadian Association of Mutual Insurance Companies and the National Association of Mutual Insurance Companies.

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