What do unincorporated groups of people agree to do under a reciprocal insurer?

Reciprocal insurers operate through a unique mutual agreement among unincorporated groups of people who agree to insure each other’s losses. This system is built on the principle of mutual aid, where each member contributes to a pool of resources that can be utilized to cover the losses of any member who experiences a loss. This collaborative approach allows individuals to spread risk among themselves, making it an effective way to manage and reduce insurance costs.

In this arrangement, the members (also known as subscribers) directly assume each other’s risks, which distinguishes their agreement from traditional insurance models where a corporation assumes risks for profit. By agreeing to indemnify each other, the group collectively acts as an insurer, demonstrating the foundational principle of reciprocity in their agreement.