The Mutual Way The theory of pure mutual insurance is to sell insurance at cost. A mutual insurance company is owned and operated by the policyholders. It is run for their exclusive benefit. There are no stockholders. Each policyholder is entitled to a voice in the affairs of the company. Directors of the company must be policyholders themselves. Only policyholders can vote in the election of directors at the annual meeting of the mutual. When mutuals were first formed, each policyholder was entitled to one to three votes according to the amount of insurance carried. Since the mid-60's, each policyholder is restricted to one vote. Together, the policyholders elect the board of directors, who in turn elect the officers of the company and hire administrative staff. In return for agreeing to secure policyholders against loss, the company collects sums of money called "premiums". Out of this fund and from income derived from investments, the company pays the losses sustained by the policyholders and the expenses of running the business. It also sets up the reserves required by law (or by good judgment) for the safe operation of the company. What is left over, or a portion thereof, could be returned to the policyholders as a refund from surplus at the discretion of the board of directors.