I’ve noticed some insurance companies, like Nationwide Insurance, have been emphasizing their ownership by their policyholders, not investors, as a selling point in their TV ads. One of the more popular ways to organize an insurance company is as a mutual company, like Nationwide, where the policyholders are the owners of the company, instead of the typical ownership of companies in other industries, where the companies are owned privately, or by stockholders. But some insurance companies are organized as stock companies, owned by stockholders. Some examples of major mutual companies are State Farm, Amica, American Family, Northwestern Mutual Life, Mass Mutual, Guardian Life, & Nationwide. Some examples of major stock companies are Geico, Progressive, Allstate, Prudential, Travelers, & Metlife. Are mutual companies better for the customer than stock companies? Do mutual insurance companies have lower rates, since they don’t need to provide a profit to investors? Do mutual companies provide better service, because the companies operate for the benefit of their policyholders? I’ll answer these & other questions in this blog post, and explain why I think, whether an insurance company is a mutual company or a stock company, its type of ownership should not sway your opinion when buying auto, property, or life insurance, except in certain situations. In fact, in spite of the appeal of policyholder ownership, where an insurance company works for its customers, instead of investors, I’ll tell you how some mutual insurance companies can cost you money. Continue reading →
