Mutual insurance companies are owned by their policyholders and, as such, are limited in their ability to raise capital. Unlike stock companies, mutual insurers cannot raise equity by selling additional shares. This constraint prompted the demutualization trend in the U.S. and in the U.K. in the 1990’s as mutual insurance companies, such as the Metropolitan Life Insurance Company, launched initial public offerings of stock. Demutualization was believed to raise capital for expansion, increase efficiency and motivate management by offering stock-based incentives for performance. But what of the policyholders? I have observed that small business commercial policyholders of mutual insurance companies are generally more satisfied with their coverage than policyholders of stock companies. In particular, the process of adjusting and paying claims appears to be more transparent and fair to the mutual policyholders. Now, the Association of Cooperative Mutual European Insurers has published a study “Valuing Our Mutuality” that examines the performance of mutual insurers. The researchers looked at premium income and growth, claims payments, expenses and financial performance. The study substantiates what I had observed anecdotally: mutual insurers generally have higher claims ratios than publicly traded insurers, such that more money goes back to the policyholders per paid premium. What was even more striking was the finding that mutuals are more efficient in their expense management: the five-year average expense ratio for life mutual insurers was 13.2% vs. 14.8% for their publicly traded peers. (The expense ratio represents the insurance companies’ expenses divided by its net premiums earned. A lower ratio represents better cost control measures.) The researchers limited their review to European life-health and property-casualty insurance companies; it would be interesting to learn if we have a similar result in the U.S. insurance industry. In Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (Wiley, second edition paperback, 2010) I urged small business owners to carefully consider the claims paying record of an insurance company when choosing coverage. Make sure to obtain quotes from mutual insurers as part of your selection process. The research shows you may be happier with the results.