Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What type of insurance organization is owned by shareholders?

1. Mutual company

2. Joint stock company

3. Reciprocal exchange

4. Fraternal organization

The correct answer is: Joint stock company

The correct answer is indeed a joint stock company. A joint stock company is an insurance organization that is financed through the sale of shares to shareholders, who own a portion of the company and have rights to its profits in the form of dividends. This structure allows capital to be raised more easily, as shareholders can publicly buy and sell their shares. In contrast, a mutual company is owned by its policyholders rather than shareholders. The policyholders collectively own the company and share in its profits, usually in the form of dividends or reductions in future premiums. A reciprocal exchange is a group of individuals or businesses that agree to insure each other, and it operates as a sort of mutual, while a fraternal organization is typically a member-owned entity that provides insurance benefits primarily to its members within a specific group or society. These other types of organizations have different ownership structures that do not involve shareholders in the same way that a joint stock company does.