Which car insurance companies pay dividends?

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Asked July 6, 2011

1 Answer


Only a certain type of insurance company pays dividends: those who are listed as mutual, or participating insurance companies. Even among mutual insurance companies, only a limited number actually pay dividends, and you will need to contact them directly to find out which ones do and which do not. If you belong to an insurance company which is listed as a mutual insurer, a cooperative, or a member or partner based company, you may find out that the company will issue you a dividend when your renewal comes around, but only if the current year's operational expenses are significantly lower than the estimated costs for the year.

The way the mutual insurance company operates is simple. At the beginning of the business year the company will determine and estimated expected cost of operation that includes company overhead, claim payments and other costs. This estimated cost is then divided among the membership and used to set the insurance premiums for that year. If, at the end of the business year, the company has fewer expenses than the estimated amount, they will notify their members that a surplus of funds has been accumulated and issue dividend payments or renewal credits to the members.

More commonly, mutual insurance companies issue discounts on renewals rather than writing dividend or refund checks. The reason for this is that it costs the company additional overhead to issue dividends, including employee costs and handling or supply costs, to name only a few. For the business point of view, it may be more beneficial to the mutual members and the company itself to simply offer a substantial discount on the following year' renewal than to incur the costs of paying dividends.

Commercial insurance companies are for-profit organizations and do not promise repayment of excess collections. Instead, these companies analyze the profits of a given year and use their statistics to assess the rates charged to customers in the following year. In this way, even commercial insurance companies can mitigate costs from year to year and while they may not offer a cash dividend, they are able to provide lower premiums to loyal customers in recognition of the excess money earned on previous operating years.

Answered July 6, 2011 by Anonymous

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