Which type of mutual insurance company can charge higher premiums if losses exceed expectations?

The correct answer is assessment mutual. Assessment mutuals operate on a principle where policyholders may be charged additional premiums based on the actual losses incurred, which can exceed the initially expected losses. This means that if the claims during a policy year surpass what was predicted, the company can levy additional assessments on its members to cover the shortfall in funds. This type of insurance structure allows for more flexible premium adjustments in response to actual risk experience.

In contrast, advance premium mutuals typically charge a set premium in advance, without the ability to adjust based on claims experience. Mutual insurers, as a broader category, may not specifically incorporate the assessment model and are often structured with more stable, predictable premiums. Fraternal insurers serve specific groups or communities and generally do not operate under the assessment model either, focusing instead on providing insurance types tailored for their membership base. Understanding the characteristics of each type helps clarify why assessment mutuals have the unique ability to adjust premiums in reaction to loss experience.