mutuality in insurance theory

Mutuality in insurance theory refers to a structure where policyholders are also owners of the insurance company. This means that the insurer's profits, created by premiums and efficient management, are often returned to policyholders as dividends or used to lower future premiums. Essentially, policyholders have a vested interest in the company's success, aligning their interests with the insurer's, which can promote fairness, stability, and customer-focused management. Mutuality emphasizes shared risk and collective benefit, distinguishing these organizations from investor-owned firms.