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Lana71 [14]
2 years ago
14

Commercial Insurances Inc. is a large stock property and liability insurer that specializes in the writing of commercial lines o

f insurance. The board of directors has appointed a committee to determine the feasibility of forming a new subsidiary insurer that would sell only personal lines of insurance, primarily homeowners and auto insurance. The new insurance company would have to meet certain management objectives. One member of the board of directors believes the new insurer should be legally organized as a mutual insurer rather than as a stock insurer. Assume you are an insurance consultant who is asked to serve on the committee. To what extent, if any, would each of the following objectives of the board of directors be met by formation of a mutual property and casualty insurer:
a. Commercial Insurance must legally own the new insurer.
b. The new insurer should be able to sell common stock periodically in order to raise capital and expand into new markets.
c. The policies sold should pay dividends to the policy owners.
d.The new insurer should be licensed to do business in all states.
Business
1 answer:
valentina_108 [34]2 years ago
8 0

The objectives of the board of directors will be that the commercial insurance cannot own the new insurer company because a new insurer will be formed based on mutual insurers where it will be controlled.

<h3>What is insurance?</h3>

Insurance generally refers to a contract between parties for the protection of financial loss, where one party (Insurance Company) promises to make good of the losses of the other party (Insured). It is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment.

Commercial lines insurance involves protection for business and organization. Commercial insurance cannot own the new insurer company because a new insurer will be formed based on mutual insurers where it will be controlled.

Also, one of the objectives of protection is to pool the risk of a sufficiently large number of insured, hence insurance important because it helps businesses to mitigate loss.

Learn more about insurance here: brainly.com/question/4710102

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<h3>What is the significance of a comparative advantage?</h3>

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