South Dakota Crop Insurance Practice Exam

Who is the chief administrator in a reciprocal insurance arrangement?

1. The policyholder

2. An attorney in fact

3. A member of the board of directors

4. The state insurance regulator

The correct answer is: An attorney in fact

In a reciprocal insurance arrangement, the chief administrator is referred to as the attorney in fact. This individual is responsible for managing the operations of the reciprocal exchange on behalf of the policyholders, who are also the subscribers of the insurance. The attorney in fact acts similarly to an insurance company, but instead of being a separate entity, they operate under the authority given by the members. This role includes managing underwriting, claims processing, and administrative tasks. The attorney in fact has the authority to act in the best interests of the policyholders, making decisions that affect the entire group. This provides a structure where the members can benefit from collective risk management while still having a dedicated individual to oversee the processes. The nature of reciprocal insurance arrangements emphasizes cooperation among policyholders, which is facilitated by having a specific individual who acts on behalf of the group. Other roles such as the policyholder, a member of the board of directors, and the state insurance regulator have different responsibilities that do not include direct management of the reciprocal insurance operations. The policyholders are the owners but do not manage day-to-day operations, while the board provides oversight without being actively involved in management. The role of the state insurance regulator, on the other hand, pertains to ensuring compliance with laws and regulations