Massachusetts Life Producer Practice Exam

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. This administrator is called a(n)...

1. Manager

2. Administrator

3. Attorney-in-fact

4. Executor

The correct answer is: Attorney-in-fact

In a reciprocal insurer, members of the group pool their resources to provide insurance coverage for one another. The concept behind reciprocal insurance is based on mutual aid, where members agree to pay claims for one another's losses. Central to this arrangement is the role of the attorney-in-fact, who serves as the administrator of the reciprocal exchange. The attorney-in-fact is a critical figure in this structure as they manage the daily operations of the insurer, including the collection of premiums and the administration of claims. This individual acts on behalf of the members and has the authority to bind the members to policies, handle the financial aspects of the insurance operation, and ensure the smooth functioning of the group. Essentially, the attorney-in-fact functions similarly to an insurer's management team but operates specifically within the structure of a reciprocal organization. This distinguishes their role from that of a traditional administrator or manager, as they hold a fiduciary responsibility to the members and make decisions that directly affect the insurance coverage and financial well-being of the group.