What Is Mutual Life Insurance?

The History of Mutual Insurance

Mutual insurance began in England in the late 17th century and was introduced to the United States in 1752 by Benjamin Franklin when he established the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire. Today, mutual insurance companies exist around the world.

Differences Between Mutual and Stock Insurance Companies

Mutual Insurance Company Stock Insurance Company
Owned by policyholders Owned by shareholders
Profits distributed to members as dividends or a reduction in premiums Profits distributed to shareholders as dividends
Invests in safer, low-yield assets Invests in riskier, high-yield assets
Cannot raise capital by distributing shares Can raise capital by distributing shares


When a mutual insurance company becomes publicly traded, it is called demutualization. This shift may result in policyholders gaining shares in the newly floated company. Most often, this is done as a form of raising capital. Stock insurance companies can raise capital by distributing shares, whereas mutual insurance companies can only raise capital by borrowing money or increasing rates.


Mutual insurance companies offer policyholders a unique ownership structure and can provide insurance coverage at or near cost. However, the lack of public trading can make it difficult for policyholders to determine the financial solvency of a mutual insurance company. Demutualization can provide a way for mutual insurance companies to raise capital, but it changes the ownership structure and can impact policyholders.

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