What type of insurer allows policyholders to participate in profits through dividends?

A mutual insurer is structured in a way that allows policyholders to have an ownership stake in the company. This is a key aspect of mutual insurance companies; they are owned by the policyholders, and any profits generated by the company can be returned to these policyholders in the form of dividends.

Dividends provide policyholders a way to benefit financially from the insurer’s success, aligning their interests closely with those of the insurer. This profit-sharing aspect is significant in fostering a sense of community and trust among policyholders. In contrast, other types of insurers, such as stock insurers, are owned by shareholders who profit through stock appreciation and dividends on shares, rather than by returning profits to policyholders.

Commercial and fraternal insurers may also issue policies, but they do not generally share profits through dividends in the same way mutual insurers do. For commercial insurers, the focus is typically on generating profit for shareholders, while fraternal insurers operate on a different model that often revolves around providing benefits to members rather than profit sharing in the traditional sense. Thus, mutual insurers uniquely focus on distributing profits back to their policyholders, making them the correct answer to this question.