What characterizes mutual companies in the insurance industry?

Mutual companies in the insurance industry are characterized by their ownership structure, which is based on policyholders. In a mutual company, individuals who purchase insurance policies are also the owners of the company. This means that the policyholders have a say in the management and operation of the company and can benefit from its profits through dividends or reduced premiums.

Since mutual companies do not have external shareholders, the decision-making primarily revolves around serving the interests of the policyholders rather than maximizing profit for stockholders. This structure supports the idea that the company exists primarily to provide insurance coverage and value to its members.

The other options describe characteristics that do not pertain to mutual companies. For example, mutual companies are not funded by government taxes, nor are they owned by shareholders who hold stock in the company, which distinguishes them from stock companies. Additionally, while some mutual companies may issue nonparticipating policies, it is not a defining characteristic of all mutual companies; they are known for issuing participating policies as well, where policyholders can share in the company’s profits.