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Truck Insurance Exchange: Is It A Good Option?

Truckers considering where to get insured may want to look into the Truck Insurance Exchange. The Exchange is part of Farmers Group, a well-established insurance company that’s been in business since 1928. The Exchange started just a few years later, in 1935. 

What is the Truck Insurance Exchange?

The Truck Insurance Exchange is part of a group of insurers in the Farmers Insurance Group. Two of the others are the Fire Insurance Exchange and the Farmers Insurance Exchange. It’s a lot like any other insurance company, but there are a few important differences. The most important difference is that the subscribers of the exchange are the owners. 

History of the Truck Insurance Exchange

The Truck Insurance Exchange is a reciprocal insurance company organized under the California Insurance Code. The history of reciprocal exchange insurance companies dates back to 1881, when six wealthy merchants from New York decided they were unhappy with the current state of insurance. They made a reciprocal exchange, whereby individuals and businesses could exchange insurance contracts. 

How does a reciprocal insurance exchange work?

There are two parts to a reciprocal exchange insurance company: the subscribers and an attorney-in-fact (AIF). The attorney-in-fact has power of attorney and runs the exchange. Each subscriber owns a part of the company. If there is a loss, each subscriber policy pays a part of the claim. If there are profits, each subscriber gets to share those, as well. 

Sometimes a reciprocal insurance exchange is called a peer-to-peer model. Usually, initial subscribers will pay a deposit to cover any losses in the future. 

Insured subscribers don’t issue policies, pay commission to agents, collect premiums, or anything like that. The members appoint a Truck Underwriters Association to do the normal, everyday tasks of running an insurance company. In the case of Farmers Truck Insurance Exchange, subscribers pay a fee to cover the costs of the AIF.

What do they do with the premium?

In 2020, the AIF fee was 14.6% and covered losses, acquisitions, taxes, license fees, the AIF and contributions to the surplus. 

What if the Exchange Loses Money?

In the event the Exchange suffers losses, it will cover those losses from the surplus. If this isn’t sufficient, the Exchange loses money, which could result in a higher AIF fee. The AIF fee could be as high as 20%, but it’s often less. 

Is a reciprocal exchange like a mutual company?

Sort of, but not quite. Both mutual insurance companies and reciprocal exchanges are owned by the subscribers, and both attempt to offer insurance at lower rates than traditional insurance companies. A key difference is that in a mutual insurance company, all the risk is assumed by the company and in a reciprocal insurance company, the risk is assumed by the subscribers. That’s why you pay into the surplus when you go with a reciprocal exchange company. 

A traditional insurance company is owned by the stockholders. Anyone can buy stock in an insurance company: you don’t have to buy your insurance there to buy stock. Traditional insurance companies try to earn as much money as possible for their stockholders. They attempt to provide good insurance as well so that they stay competitive and don’t lose business. 

Mutual insurance companies are owned by policyholders. Mutual insurance companies attempt to minimize the cost of insurance for their policyholders, although obviously they also want to make a profit. 

With a reciprocal insurance exchange, the structure is a little different. Policyholders own the exchange. The exchange is an exchange of insurance contracts between policyholders. So, every subscriber is both the insured and the insurer. They divide the risk among the policyholders as opposed to the organization. If a policyholder suffers a loss, all the other policyholders cover the costs. In 2022, these costs are minimal, although when reciprocal exchange insurance originated, there was more risk involved. 

What is a Subscriber Savings Account?

To get insured with a reciprocal insurance company, you pay a premium to cover any losses. At the end of the year, that money is deposited into the Subscriber Savings Account. The account earns interest, just like a regular savings account. 

In addition to paying for your own policy, your premium goes towards:

  • Losses (if any)
  • Taxes
  • Acquisitions
  • License fees
  • AIF fees
  • Surplus contributions

Since you have to pay in for all these things, you may be asking yourself if the rates low enough to make buying your insurance from Truck Insurance Exchange worth it. The answer is…it depends. They’re certainly worth getting a quote from, but, as always, it pays to shop around. 

Farmers Truck Insurance Exchange

Farmers Truck Insurance Exchange (TIE) focuses on commercial truck insurance, although other aspects of Farmers cover everything from life insurance to pet insurance. TIE offers insurance for:

Farmers started with the goal of providing insurance for rural farmers. Farmers has an A+ score with the BBB and fewer than average complaints on the NAIC (National Association of Insurance Commissioners). 

Does the Truck Insurance Exchange use agents?

Yes, it does. This is to do what other agents do: offer you the best insurance that fits your needs and helps you decide on policies. If you want to buy your insurance online, you’ll have to look elsewhere. 

Learn more at how to get commercial truck insurance quotes online

Last Thoughts

If you’re looking for commercial truck insurance, you should consider Farmers Truck Insurance Exchange. Although you’ll have to work through an agent, they have a decent customer service rating and the fact that you’ll be an owner of the company might appeal to you.

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