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This type of company is one that has evolved over time into a ‘branded” image in the eyes of the public.  This is the opposite of what we have come to know in today’s world as Health Maintenance (HMO) and Preferred Provider Organizations (PPO).

A traditional insurer selling health coverage may specialize in just health coverage.    The types of insurance they sell may be referred to as accident and health (A&H) or accident and sickness (A&S) companies.   Most states require a separate license to write life, health and property casualty.

Stock and Mutual.  Not only can an insurance company be categorized by the type of insurance, they can also be considered in terms of its ownership as either a stock or mutual company.

At the time of organization, a stock company sells stock to raise the money necessary to operate a business.  The stockholders are not necessarily insured by the company nor do policyholders necessarily own stock in the company.  It is in business solely for the purpose of selling insurance to policyholders.

On the other hand, with a mutual company the policyholders are also owners of the company and as such, can vote to elect the company management.  Any monies beyond the operating costs of the company may be returned to the policyholders as dividends or reductions in future premiums.

Consumer Cooperatives.   There are two different types of cooperatives.  They are consumer cooperatives and producer cooperatives.  Producer cooperatives include companies like Blue Cross/Blue shield and some Health Maintenance Organizations which we will discuss further on.

Additionally, there are two types of consumer cooperatives.  One is the mutual insurance model discussed previously and the other less common and unincorporated type is a reciprocal company.

A reciprocal company is based on the model of give and take.  Members agree to share insurance responsibilities among all members.  All members insure one another and share in the losses and no member can buy insurance without committing to providing insurance in return.  This type of consumer cooperative is managed by an attorney-in-fact who handles all matters of business for the cooperative.

Participating and Non-participating Policies.  These terms indicate that the policyholder of a traditional type of insurance, either does or does not participate in, or receive, a share of any surplus that results from an insurers business operations.  These terms are also known as par and non-par.

The surplus from which participating policyholders might receive a return are excess reserves for claims, interest on investments and savings on expenses.  This represents amounts not ear marked for any particular purpose and are therefore available to participating policy owners.