A reciprocal exchange is similar to a mutual company, in that policyholders own the company. In a mutual company policyholders share in the profits and they are not normally liable for company losses however in a reciprocal exchange policyholders share in the losses as well as the profits.
Exchanges are usually formed by business groups to provide costly liability insurance so it in the past it has been unusual for a reciprocal exchange to be formed to sell personal insurance such as auto insurance.
Reciprocal exchanges are an alternative to traditional insurance companies. A few of the leading nationwide auto insurers are in fact actually reciprocal exchanges. Two of largest personal automobile insurers in the United States, Farmers Insurance Group and USAA, are reciprocal exchanges. Farmers Insurance is headquartered in California and offers auto insurance in most states. USAA has its headquarters in San Antonio, Texas. This exchange offers auto, home and life insurance to military members and their families nationwide.
One state in particular that has been in the news regarding reciprocal exchanges and auto insurance in the recent years is New Jersey. The Citizens United Reciprocal Exchange (CURE) sells auto insurance in New Jersey. It is a not-for-profit reciprocal exchange. This exchange was founded by a former New Jersey Insurance Commissioner and an insurance expert.
There is also NJSIA which is another policyholder owned company. This reciprocal exchange for auto insurance is a group of individuals, corporations or entities that have come together as members and agreed to exchange contracts of insurance (policies) and share their insurance risks among themselves within their select group.
In Florida there is PURE (Privilege Underwriters Reciprocal Exchange) which is a property / casualty insurance company that provides homeowners insurance as well as private fleet auto insurance.
We do not have a list of what states allow reciprocal exchanges so if you are interested in knowing about a specific state contact that state's insurance regulatory body or possibly contact the NAIC.
To get a rate quote from an auto insurance specialist follow this link.
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