How do reciprocal companies share risk?

Reciprocal companies share risk among member subscribers, which is fundamental to their structure. In this model, each member essentially acts as both an insurer and an insured for the group. Members contribute to a common fund that is used to pay for the losses incurred by any member of the group. This mutual sharing of risk allows each member to benefit from lower costs for coverage, as the financial responsibility for claims is distributed across all members. Each subscriber in a reciprocal company participates in the process, which can foster a sense of community and cooperation among the members. This method of risk-sharing is distinct from other structures, such as insurers relying on centralized management or outside investors, which do not involve such a collective approach.