A mutual insurance company is an insurer that is owned and controlled by its members. The members are policyholders of the insurance company who receive dividends in exchange for their premiums that they pay. These dividends may either be issued as payments or used to reduce the policyholders' premiums.

The mutual insurance company model has been used for centuries and is based on the concept of collective risk. This model works in situations where many policyholders contribute to the same fund, which is then used to pay for losses of any member who experiences an unexpected event. Typically, this involves the insurer assembling a pool of policyholders for a specific type of insurance and pooling the premiums paid by each policyholder to create a reserve. When one of the policyholders experiences a loss, the funds from the mutual reserve are used to help replace what was lost, thus protecting the policyholder from bearing the entire financial burden of the loss on their own.

The funds in the reserve are also used to help pay for the operational costs of the insurance company. This includes the costs of recruiting and training employees, advertising and marketing, purchasing capital equipment and software, etc. Any profits are then returned to members in the form of dividends or reduced premiums.

Unlike publicly held insurance companies, a mutual insurance company only answers to its policyholders. Its board of directors is elected by the policyholders, giving them voting rights and the final say on matters such as premium rates, investments and the payment of dividends. This ensures the company is held accountable to its members and is guided solely for their benefit.

The mutual insurance company model has helped people secure coverage for over two hundred years and continues to be an industry leader today. While the public markets can offer some attractive financial rewards, at the end of the day mutual insurance companies remain dedicated to serving their members first and foremost.