Mississippi Property & Casualty Practice Exam

A reciprocal insurer operates through what individual entity?

1. CEO

2. Attorney-in-fact

3. Trustee

4. Insurance Agent

The correct answer is: Attorney-in-fact

A reciprocal insurer operates through an attorney-in-fact who acts on behalf of the members of the reciprocal. In this arrangement, the members of the reciprocal pool their resources to provide insurance coverage for each other. The attorney-in-fact is responsible for managing the day-to-day operations of the insurer, making decisions regarding underwriting, claims handling, and overall administration of the group. This unique structure allows members to share risks and benefits collectively, differentiating reciprocal insurers from more traditional insurance companies that are typically structured as corporations. The role of the attorney-in-fact is critical; they are usually compensating through a fee based on the premiums collected or a percentage of the net profit, thus aligning their interests with those of the members. This model emphasizes collaboration and mutual support, as the members are both the insured and the insurers. Other roles mentioned, such as a CEO, trustee, or insurance agent, do not encompass the same level of responsibility or the unique operational framework present in reciprocal insurance arrangements.