Casualty Actuarial Society (CAS) Practice Exam

A key benefit provided to policyholders in mutual insurance companies is the return of excess profits as dividends. In a mutual insurance company, the policyholders are essentially the owners of the company. This structure means that if the company generates profits beyond what is necessary to cover claims and expenses, those profits can be distributed back to the policyholders in the form of dividends.

This is distinct from stock insurance companies, where any profits are generally distributed to shareholders rather than policyholders. The return of excess profits as dividends aligns with the mutual model, fostering a sense of ownership and partnership among the policyholders, as they are direct beneficiaries of the company’s profitability. It also incentivizes policyholders to remain with the company, knowing they have a stake in its financial success.

The other options, while they may seem beneficial in different contexts, do not specifically pertain to the mutual insurance model. For example, exclusive investment opportunities and access to government grants are not characteristic features of mutual insurance companies, and preference in policy renewals does not pertain to the financial structure and profit distribution that define their operations.