Maryland Life and Health Insurance License Practice Exam

A nonparticipating company is sometimes called a(n)?

1. Stock insurer

2. Mutual insurer

3. Fraternal insurer

4. Reciprocal insurer

The correct answer is: Stock insurer

A nonparticipating company is commonly referred to as a stock insurer because it is owned by shareholders who provide capital and receive any profits in the form of dividends. In a nonparticipating policy, policyholders do not receive dividends based on the insurer’s earnings, which distinguishes it from a mutual insurer, where policyholders may receive dividends. This structure allows stock insurers to operate more flexibly in terms of investments and organizational governance compared to mutual insurers, which are owned by their policyholders. Understanding this distinction is crucial for those studying for the Maryland Life and Health Insurance License, as it highlights the different operational models within the insurance industry.