Stock Insurance Company
A stock insurance company as described in the insurance industry is a trade firm which includes the public. The insurance company offers shares that are made available to the public in order to raise the capital at its heights. In this manner, the stock insurance company would be able to use and utilize the resources added to the capital that will be a key to help the firm grow in a large perspective greater than the mutual insurance company.
Generally, the insurance company will be the one who will issue the significant shares in a common stock form. This is one type of security which forms an equal corporate ownership which is unlike the preferred stock which usually provides priority in terms of dividend payments when it comes to liquidation. Common stocks supply the stakeholders with each voting rights. In this manner, the individuals who are holding these stocks will be able to influence the agreement and the decision making made by the insurance company including the election of the members of the board of directors. Some of the companies also allow these common stakeholders to be at hand in establishing the company’s policy and objectives including the different events that are scheduled for approval when it comes to stock split.
Stock insurance companies usually pay their stockholders through capital appreciation or dividends. One the company was able to profit and found out an additional surplus, the amount or cash may either be paid to the stakeholders through dividend in a form of cash, stock and property or it can be retained as reinvestment in the company to boost more profit. Likewise, appreciation payments will be paid to investors once a particular asset of the company gains value. This is the reason why stock insurance companies are more profitable in terms of business venture in the investing field.
The policyholders are in fact may be considered as the stockholders in the insurance company however, it is now really necessary. Most of the policyholders find investing in a certain business like insurance company while acquiring an insurance policy to the same business a very significant act. In this manner, the policyholder is doing two benefits at the same time, as an investor of the business of his portfolio and an insured.
The main advantage of stock insurance company compared to mutual insurance company is that it mingles and transacts with the pool of financial market in order to acquire additional funds. Mutual insurance companies with the fact that the holders are all paying to a huge fund that enables the payments to the valid customers possible. The big challenge with this kind of framework is the inability of to make better of the capital standing. Most of the companies who are using this model are now moving to the stock model in order to remain in the market share. By moving in this business model, the assets will be evaluated and a public issue offering on raising more capital will be endorsed to keep the company growing.