A Guide To Life Insurance - Types Of Uk Insurance Company ....

 

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Types Of Uk Insurance Company...

Just as there are several varieties of life insurance there are likewise several types of life insurance company. Just search Google and you will see the sheer number of underwriters, brokers and price comparison sites listed.

Conventional with profit and non-profit policies are the speciality of the "ordinary branch" life insurance companies, which may be Mutuals (owned by their own policyholders), or proprietary companies (owned by shareholders like any other industrial company).

One separate class of proprietary company is the composite companies, which transact not only life insurance but general business, too. Many of the largest life companies fall into this latter category (such as Prudential, Guardian Royal Exchange, Legal & General, Commercial Union and Royal).

The difference between mutuals and proprietary companies is that in the case of the mutual all the profits go to the policyholders, whereas in the proprietary company the shareholders get a proportion of the profits.

In practice, however, the difference between mutuals and shareholder-owned companies is not so significant.

Several proprietary companies used to have a clause in their constitutions allowing 10% of profits to be distributed to shareholders, but some have dropped or amended this because they could not actually afford to do it without weakening their competitive position.


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In theory, the funds provided by shareholders are an extra resource for the proprietary company to draw on if things go wrong; in practice, many of the old-established companies, whether mutual or proprietary, have such large reserves that the amounts of shareholders' funds can be of academic interest only.
Strictly speaking, the management of mutual companies is answerable only to policyholders, while that of proprietary companies is answerable in the first instance to shareholders.read next:for Unit-linked Companies


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