Final answer:
A Mutual Insurance Company is an incorporated insurer owned by its policyholders. Policyholders have control over the company, unlike a Stock Insurance Company owned by shareholders. Corporate governance is important in monitoring a company's top management.
Step-by-step explanation:
An incorporated insurer owned by its policyholders is known as a Mutual Insurance Company. Unlike a Stock Insurance Company which is owned by shareholders who have invested capital into the company through the purchase of stock, a mutual insurance company is owned by the policyholders themselves. These policyholders elect the board of directors and are entitled to receive dividends or reductions in their premiums based on the company's profitability.
When a firm decides to sell stock, which financial investors can buy and sell, it transforms into a public company and is owned by its shareholders. In contrast, individual or group ownership without the selling of stocks characterizes private companies, including sole proprietorships and partnerships. Corporate governance refers to the mechanisms in place to oversee the management of these companies, ensuring that the top executives are acting in the best interests of the shareholders.