The attorney-in-fact manages the ___________ and is paid a fee or commission for management services rendered.

Question

Options

• Areciprocal
• Bdividend
• Cinterinsurer
• Dreinsurer

• A
  72% (42)
• B
  17% (10)
• C
  7% (4)
• D
  3% (2)

Explanation

Option A is correct because a reciprocal insurance exchange is a unique insurer where policyholders (subscribers) mutually insure one another, and an attorney-in-fact is appointed to manage all operations on their behalf - receiving a fee or commission for those services.

Why the distractors are wrong:

• B. Dividend - A dividend is a distribution of surplus funds back to policyholders, not an entity that is managed.
• C. Interinsurer - While "interinsurance exchange" is a synonym for a reciprocal, "interinsurer" alone is not the standard term used to describe this type of arrangement.
• D. Reinsurer - A reinsurer provides insurance to other insurance companies and is governed by its own corporate leadership, not an attorney-in-fact.

Memory tip: Think of a reciprocal as a group of people saying "I'll cover you if you cover me" - someone has to manage all those agreements on everyone's behalf, so they appoint an attorney-in-fact to act for the whole group.

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