Final answer:
Mutual insurers are designed to provide low-cost insurance rather than generate profits for stockholders, which is true. They focus on serving policyholders' interests by redistributing excess funds through dividends or reduced premiums. Stringent regulation aimed at lowering premiums can have consequences like insurers leaving the market.
Step-by-step explanation:
The question addresses the fundamental purpose of mutual insurers by asking whether they exist to provide low-cost insurance in lieu of generating profits for stockholders. The answer to this question is true. Mutual insurers return surplus funds to their policyholders in the form of dividends or reduced future premiums instead of distributing profits to stockholders, which is consistent with the stated purpose of mutual insurers.
It's important to understand that while regulators may try to keep premiums low in various ways, strict regulation can lead to a negative outcome where companies may opt not to offer insurance in the state with overly stringent rules. The fundamental law of insurance states that the average amount individuals receive cannot be more than the average amount paid in premiums. Hence, mutual insurers aim to balance low costs with sustainability.
When a life insurance company accumulates cash after policy payouts, this cash can be lent or policyholders may borrow against their policies. However, these loans must be repaid with interest, which contributes to the insurer's operations and financial stability.