Insurance Broker Certification Practice Exam

Which type of insurer issues nonparticipating policies?

1. Stock insurer

2. Mutual insurer

3. Reciprocal insurer

4. Fraternal insurer

The correct answer is: Stock insurer

A stock insurer is the correct choice because it is a type of insurance organization that issues nonparticipating policies. In a stock insurer, the ownership of the company lies with shareholders. These insurers do not allow policyholders to participate in the profits or managerial decisions, which distinguishes them from other types of insurers like mutual insurers. Nonparticipating policies mean that the policyholders do not receive dividends or profit-sharing benefits from the insurer’s profits. This characteristic aligns with how stock insurers operate, focusing more on shareholder returns rather than distributing earnings directly to policyholders. In contrast, mutual insurers issue participating policies that allow policyholders to share in the company's profits through dividends. Reciprocal and fraternal insurers have different structures and operational models that also typically involve some level of member participation or mutual benefit. Therefore, it is the stock insurer that uniquely issues nonparticipating policies, making it the correct answer in this context.