Some people ask what the difference is between insurance companies. Why do some people get rebates or refunds at the end of the year and others do not? Its a bit complicated, but let me see if I can break it down.
There are four different types of insurance companies. (Okay, there are more, but for simplicity sake, we wont take about state run insurance companies or insurance gaurantees that act like insurance companies, but are not. We will also leave self insurance and captives out of this.)
First, there are stock companies. Stock companies, Travelers, Hartford, etc… are publicly traded insurance companies. They operate like any other business. They try to make a proft and keep their shareholders happy.
Second, there are mutal companies. Mutual companies are, in theory, organized for the benefit of their members. (They may not always succeed, but its a theoretical goal.) Instead of making a profit, the goal is to provide insurance at the lowest possible price to its members. CSAA is a good example of a mutual company.
Third, there are syndicates. This is quite a complicated area of insurance, but I will provide as basic a discussion as possible. Lloyds of London is a syndicate. The members grant a managing agent authority to underste insurance on behalf of the members. In the old days, members of Lloyds put up their entire wealth and, in a bad year, could lose all of their money. These days, members can limit their exposure.
Finally, there are reciprocal insurers. Farmers Insurance Exchange is a reciprocal insurer. The members are the insureds and the reciprocal is the insurer. The members share profits.
Why does any of this make a difference? Reciprocal insurers and mutual companies may offer lower rates, since they are not in business to make a profit, in theory. Syndicates are usually good at offering some of the more interesting types of insurance, like insurance on the arm of a quarterback or the leg of a soccer player. But, remember when searching for insurance, to check at least one mutual and one reciprocal insurer.