Stock insurance company
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Stock insurance company is an insurance company with capital, which was contributed by shareholders, who control the organization's activity and derive all profits and losses from it (Cane, P., Atiyah, P.S. (2013), p. 34-35).
Classification of insurance companies
Insurance companies can be divided into:
- Stock insurance companies
These are corporations that are owned by shareholders. Their main goal is to achieve the highest possible profit. The owners of the insurance policy do not have a direct impact on the company's profits and losses. Before a permit for joint-stock activity is obtained from regulatory authorities, the insurer must have a minimum capital and surplus. However, if the company's shares are a public trading entity, the insurer must meet several additional requirements.
- Mutual insurance companies
They are usually created due to the growing need for insurance. Mutual companies appear as small local suppliers as well as domestic and international suppliers. Some of them focus only on one specialized insurance market, while others have a broad offer covering both real estate and health and life insurance. The 25% of the US market are mutual companies that incorporate the five largest personal and property insurers.
Mutual insurance companies, however, are more popular across the world, but there are more insurance companies in the US than mutual insurers. mutual insurance companies, as well as shares are subject to national insurance regulations but moreover they are subject to national funds, which the state guarantees in the event of insolvency (P. Borscheid, N.V. Haueter (2012),s. 5-15).
Demutualization
Over time, many mutual insurance companies have demutualized. Demutualization is a process by which policyholders change into shareholders, while company shares enter the public stock exchange. By transforming into a joint-stock company, owners of insurance companies can unlock access capital and value. This will allow faster growth, expanding the markets to domestic and international ( G. Poitras (2012), p. 163-170).
The Bottom Line
Investors are afraid of profits and dividends. Customers, on the other hand, are interested in costs, services and coverage. A model of an insurance company that would meet both needs would be an ideal model, which unfortunately does not exist. The best choice:
- There are both companies that promote benefits that can be achieved by choosing a policy from a mutual insurance company, as well as those that focus primarily on savings resulting from insurance costs. Which of the insurers to choose depends on the type of insurance we need.
- Policies that are renewed every year, such as home or car insurance, can be easily transferred between companies whenever the customer becomes unhappy. It is worth, in this case, choose stock insurance company. When choosing long-term insurance, for example life insurance, it is best to choose a service focused company, that is, a mutual insurance company (M. G. Cruz, (2015), p. 659-663).
References
- Borscheid P., Haueter N.V. (2012), World insurance : the evolution of a global risk network , Oxford
- Cane, P., Atiyah, P.S. (2013), Accidents, Compensation and the Law, Cambridge University Press
- Cruz M. G. and others, (2015), Fundamental Aspects of Operational Risk and Insurance Analytics: A Handbook of Operational Risk, John Wiley & Sons
- Poitras G. (2012), Handbook of Research on Stock Market Globalization, edited by Poitras G., Simon Fraser University, Canada
Author: Aleksandra Szczęch
