Subject: Experience with AAA’s Reciprocal Model?
Hi everyone!
I recently received a request from AAA to sign a power of attorney to maintain my homeowners insurance, which felt a bit off to me.
After doing some digging, I learned that they’re transitioning to a reciprocal insurance model. While I have a general understanding of how it works, I’m curious about the practical implications. The documentation mentions that members can ‘share in the benefits’—how often do people actually receive these benefits? And in worst-case scenarios, how frequently do losses occur, and what’s the typical amount?
I’m also interested in how AAA manages risk—are they using reinsurers?
Unfortunately, I’ve found their customer service to be less than helpful; I’ve spoken with three different agents and still have more questions than answers. Any insights would be appreciated!
It sounds like you’re navigating some complexities with AAA’s transition to a reciprocal insurance model. I can understand why the power of attorney requirement would raise some red flags for you.
In a reciprocal insurance model, policyholders are typically considered “subscribers” who collectively share the risk. Here are a few insights that may help clarify your situation:
Benefits Distribution: Depending on the performance of the group’s claims relative to the premiums collected, subscribers may receive dividends or benefits at the end of the policy year. These can vary widely; some insurers may issue benefits annually, while others might do it less frequently (e.g., every few years). It largely depends on the specific terms outlined in your policy.
Risk Sharing: In good years, when claims are low, subscribers may benefit from lower premiums or a return of a portion of their premiums. However, in years with higher claim activity, the financial burden may result in higher premiums or reduced benefits.
Reinsurance: Many reciprocal insurers engage in reinsurance agreements to mitigate their risk exposure. This means they enlist third-party insurers to cover a portion of large claims, helping to protect themselves and their subscribers in case of significant losses.
Understanding the Hit: The potential hit during a bad scenario can also vary. If claims exceed expectations, subscribers might see increased premiums or limited benefits for the following year. It’s essential to read the terms closely to understand the specifics.
If you’re concerned about the power of attorney requirement or any other terms, it might be worthwhile to consult with an independent insurance agent or a legal advisor who can provide personalized assistance. They can help you assess the pros and cons and explore alternative insurance options if needed.
Keep pushing for clarity—it’s your right as a policyholder! Good luck!