Copeland Insurance


What is a Reciprocal Insurance Exchange Company?

Recently one of our Partner Companies, Tower Hill Insurance Group, started a new insurance company called Tower Hill Insurance Exchange.  The plan is to transition their current customers from Tower Hill Signature and Tower Hill Preferred to this new company.


There are three main reasons that they are doing this:

  1. Merging the customers to one company will make them a larger and more stable company.
  2. Less risk for Tower Hill. They will become the Service Provider and only get paid a fee for managing the company.
  3. The new company should have better results in Florida. We’ll explain later.

The Florida Property Insurance Market is in dire straits. Currently, there is an increase of fraudulent activity. Shady contractors, public adjusters and attorneys are taking advantage of loopholes in insurance policies and Florida laws.  Here is an info-graphic from the FAIA to explain more (Click Here). Even though we have not seen any major hurricanes in a few years, the companies are paying more in property claims than ever before (although most of the payments are going to attorney fees)

Many Florida Property Insurance Companies have either stopped accepting new policies, non-renewed a large portion of their customer base, or put major limitations on underwriting guidelines to stop growth. Citizens (State Insurance company of “last resort”) is growing faster than any other property insurance company in Florida.

Insurance Policies are not intended to be maintenance policies. Yet, some consumers are using contractors, public adjusters and attorneys to get a free new roof when the roof has aged and needs replacement.  I get it.  Roofs are expensive…especially at today’s inflation rates. However, this is like having your auto mechanic file a claim to your auto insurance companies when they wear out. But I digress.

What is a Reciprocal Insurance Exchange?

A Reciprocal Insurance Exchange has 3 parts:

  1. Subscribers – These are the policyholders. They are the owners of the company and share in the risk.
  2. Agent in Fact – This will be the managing company (Tower Hill Risk Management) who handles the Exchange’s operations. The subscribers sign over a limited Power of Attorney to allow them to run all facets of the company.
  3. Subscribers Advisory Committee – Annually elected officials that just review oversight.

The Advantages of a Reciprocal Insurance Exchange

Subscriber Savings Accounts – Once the company makes an underwriting profit (spends less than it makes), the subscribers will begin to share in the profits.  Although they won’t get a check each year, they will receive any funds from the account when they cancel their policy (sold property, went to another company, etc.).

More Transparency – As a Subscriber, you will be notified of the financials of the Exchange. No, you won’t know what neighbors filed a claim, but you will know the financial health of the company.

Mindset of the Policyholder – Since the policyholder is an owner, it is believed it will decrease unethical decisions by policyholders.  Better maintenance decisions on their home.  Less likely to file frivolous claims. Less likely to be fooled by shady contractors that knock on their doors. They know bad decisions affect their premiums and chances of getting an underwriting profit. At least, that is the hope.

The Disadvantages of a Reciprocal Insurance Exchange

Subscriber Surplus Contributions are non-refundable. In the beginning, the company will be charging 10% of the annual premium as a Subscriber Fee. If you cancel your policy midterm, you will get a smaller refund that you would get with most admitted insurance companies.

Although Tower Hill Insurance Exchange is not one of these, some Reciprocal companies can offer assessable policies. This means they can charge additional premiums if operating expenses were higher than expected. Fortunately, Tower Hill Insurance Exchange policies are non-assessable.

If you have any additional questions about the Tower Hill Insurance Exchange, visit the THIE page.

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