What distinguishes a mutual insurer from a stock insurer?

A mutual insurer is characterized by its ownership structure and primary purpose. Specifically, it is owned by its policyholders, who also share in any profits generated by the insurer through dividends or reduced premiums. This ownership model emphasizes the provision of insurance primarily for the benefit of the policyholders rather than for profit maximization for stockholders, which is the case with stock insurers.

The significance of this distinction lies in the fact that mutual insurers are more closely aligned with the interests of their policyholders, as those individuals have a direct stake in the financial health and performance of the company. The profits they generate are intended to be distributed back to the policyholders rather than being paid out to external stockholders.

The other options describe attributes more typical of stock insurers or do not directly capture the essence of mutual insurers. For example, mutual insurers are not owned by stockholders and do not operate under the direction of a board selected by stockholders, as this reflects a stock insurer's structure. Additionally, while mutual insurers can potentially be formed as unincorporated organizations, this is not a defining characteristic when comparing them to stock insurers. The core distinction lies in the orientation towards policyholders as owners within a mutual structure.