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).


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:

  1. 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.
  2. 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).

Examples of Stock insurance company

  • Prudential Financial: Prudential Financial is a multinational financial services company that offers a range of products and services, from life insurance to asset management. Prudential is a publicly traded company, meaning that it has shares that are issued by the company and traded on the stock market. Prudential’s shareholders have the right to vote on corporate decisions and are entitled to dividends from the company’s profits.
  • Allstate Insurance: Allstate Insurance is a publicly traded insurance company that offers a range of products, including property, casualty and life insurance. Allstate’s shareholders have the right to vote on corporate decisions, receive dividends and reap the benefits of any capital gains the company generates.
  • MetLife: MetLife is a publicly traded insurance company that provides life, health, dental and disability insurance. It also offers annuities and other retirement products. Shareholders of MetLife are entitled to vote on corporate decisions, receive dividends and benefit from capital gains.

Advantages of Stock insurance company

A Stock insurance company has a number of advantages. These advantages include:

  • Access to capital: Stock insurance companies have access to large amounts of capital, which allows them to provide more comprehensive coverage than other types of insurance companies.
  • Increased stability: Stock insurance companies have more stability than mutual insurance companies, as their capital is not dependent on the volatility of the stock market.
  • More control over operations: Shareholders of stock insurance companies have more control over their operations, as they are able to make decisions on investments and operations.
  • Tax advantages: Stock insurance companies may receive tax advantages, as their profits are not subject to corporate tax.
  • Greater profits: Stock insurance companies can generate greater profits due to their access to larger capital pools.

Limitations of Stock insurance company

The limitations of stock insurance companies include:

  • Lack of liquidity - Stock insurance companies can be difficult to liquidate quickly due to the need to obtain approval from shareholders.
  • Limited resources - Stock insurance companies are limited in the resources they can access to fund operations.
  • Limited risk appetite - Stock insurance companies may have limited risk appetite as shareholders are likely to be conservative with their investments.
  • Regulatory framework - Stock insurance companies must comply with a range of regulations which can limit the types of products they can offer.
  • Volatility - The stock market can be volatile, which can lead to fluctuations in the share price of a stock insurance company.
  • Decreased profitability - The costs associated with operating a stock insurance company can lead to decreased profits.
  • Size - Stock insurance companies tend to be smaller than other types of insurance companies, which can limit their ability to compete in the market.

Other approaches related to Stock insurance company

At the beginning, it is important to understand that there are other approaches related to Stock insurance companies. These approaches include:

  • Mutual insurance companies: These are companies where the policyholders are also the owners and the profits of the company are distributed to the policyholders.
  • Reinsurance companies: These companies are used to reduce the risk of insurers by transferring part of the risk to a reinsurer.
  • Captive insurance companies: These are companies that insure the risks of their parent company and are generally organized as a subsidiary of a larger corporation.
  • Lloyd's of London: This is a large insurance market that works as a collective of individual and corporate members who underwrite a variety of risks.

In summary, stock insurance companies have a number of approaches related to them, including mutual insurance companies, reinsurance companies, captive insurance companies, and Lloyd's of London. Each of these approaches has its own unique characteristics and functions.

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Author: Aleksandra Szczęch