What type of insurer is referred to as “participating” if the policy pays a dividend?

A "participating" insurer is defined by its ability to pay dividends to its policyholders based on the insurer's financial performance. This characteristic is typically found in mutual insurance companies, which are structured to benefit their policyholders, who are also members and owners of the company. When the mutual company's operations yield profits, these profits may be distributed to policyholders in the form of dividends.

Mutual insurance companies operate under the principle of shared ownership among policyholders, allowing them to directly share in the company's success. Unlike stock insurance companies, which are owned by shareholders and distribute profits as stock dividends or retained earnings, mutual companies prioritize policyholder benefits and may return excess funds through dividends to those who hold a participating policy.

The concept of participation also implies that policyholders have a vested interest in the management and operating results of the mutual insurer. This may influence their loyalty and engagement with the company, knowing they could receive dividends based on the company's profitability.

The other types of insurers, such as stock insurance companies and commercial insurance companies, typically do not operate under the same model and do not necessarily pay dividends to policyholders. Fraternal insurance societies also have unique structures that often differ from the traditional dividend-paying models of mutual insurers. Thus, the correct identification