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Private Commercial Insurance Providers

Private commercial insurance companies sell group and individual insurance policies to employers, organizations and individuals. They assess risk through underwriting and establish premiums with the aim of making a profit.

A number of different types of insurance institutions fall into the category of private commercial insurers, including: stock companies, mutual companies, fraternal benefit societies, reciprocal insurers, Lloyd’s of London and reinsurers.

Stock insurance companies are owned by shareholders who provide capital for the company by investing in it and share in the company’s earnings or losses. Writing a majority of property and liability policies in the United States and also many life policies, stock insurance companies are major players in the insurance industry. Each stock insurance company is controlled by a board of directors who can declare a dividend when the company is generating sufficient profits. In a “participating” company the dividends are paid to the shareholders, in a “non-participating” company, they are not.

Many major life insurers are mutual insurance companies which are owned by policyholders. Funds left after the settling of claims are paid out to the policyholders as policy dividends; losses usually result in dividends being discontinued.

Fraternal benefit societies offer primarily life insurance policies to their members who are part of a fraternal charitable organization or lodge. Fraternals benefit from special income tax and state insurance regulations.

Reciprocal insurers are made up of individuals formed into an unincorporated group of subscribers. The subscribers have individual indemnity agreements to provide insurance for each other. They pay premiums into their separate accounts and earn interest on the funds. Insurable claims from any subscriber are paid out by deducting an equal amount from each subscriber’s account. An attorney, overseen by a committee of subscribers, handles the underwriting, claims handling, administration and marketing. Reciprocal insurers enable an individual policyholder to enjoy some of the premium reduction and risk spreading of group policies.

Lloyd’s of London offers a central meeting place and clerical services to its insurance industry members, both individuals and corporations. The members form syndicates with a shared underwriter, but each member is responsible for the profits and losses resulting from the insurance policies they write. Lloyd’s of London has a governing committee which assesses each member to ensure integrity, experience and sufficient capital (made up of funds held in trust at Lloyd’s and the member’s wealth).

Reinsurers provide insurance for other insurance companies. Reinsurance is available for all types of insurance policies including: life, accidental death, health, property and commercial. In exchange for taking on risk from the primary insurer, the reinsurer shares in the premiums and profits. Proportional reinsurance involves a reinsurer taking over a percentage of each policy that an insurer writes. The reinsurer earns that percentage of the premiums and accepts that percentage of the losses resulting from claims against those policies. In non-proportional reinsurance, or stop loss insurance, the reinsurer only pays if the loss exceeds a set limit.

Private for-profit insurance companies are diverse and a major component in the insurance industry, writing individual and group policies for all types of insurance.