How Does a Reciprocal Operate?
A reciprocal operates much like any other insurance company. Each policyholder, called a subscriber, is both an insurer and an insured in a reciprocal. The relationship is created by the Subscriber’s Agreement and Power of Attorney authorizing the Attorney-in-Fact to do certain things on behalf of the Board of Governors, such as collect premium, invest monies, pay claims and expenses and all other day-to-day functions associated with operating an insurance company. The Attorney-in-Fact is the sole service provider to the Board of Governors. All subsidiary services are sub-contracted by the Attorney-in-Fact, which provides immediate cost benefits and efficiency of scale.
