The Truck Insurance Exchange (TIE) has been in operation since 1935 and is headquartered in Woodland Hills, California. The Exchange is part of Farmers Group, Inc., one of the largest insurers in the U.S., serving more than 10 million customers across 19 million policies.
If you’re weighing your options for truck insurance, you may be considering the TIE. First, it’s crucial to understand how the Exchange works and whether it’s the right choice for you.
The Insurance Exchange is a reciprocal insurance company and is organized under the California Insurance Code. TIE offers comprehensive commercial truck insurance and even offers specific policies for food trucks.
For food trucks, TIE combines its truck insurance with its business liability coverage for restaurant protection.
TIE is one of many insurers that make up the Farmers Insurance Group, or FIG. Other affiliates include Farmers Exchange and Fire Insurance Exchange.
The Exchange offers auto, homeowners, business owner and personal umbrella insurance. Subscribers own the Exchange and choose its governing board.
The board oversees:
- Attorney-in-face (AIF) performance
- Financial affairs
Both of these must be in line with the terms of the subscription agreement (more on that soon).
With TIE, members can exercise their right to vote in three ways:
- Online through their Farmers.com account
- At the annual members meeting in California
- By mail via a paper proxy
How Did Reciprocal Insurance Companies Come About?
Reciprocal insurance companies like TIE got their start in 1881. Then, as the story goes, six merchants from New York decided to indemnify one another because they were unhappy with the way insurance companies were running things.
The merchant’s buildings were well-constructed and well-maintained, but their premiums did not reflect their potential losses. In addition, risk classification wasn’t quite as developed as it is today. Because the merchants were able to absorb some losses, they determined that “self-insuring” was the most practical way to reduce risk while lowering costs.
So, the concept of reciprocal insurance companies was born.
The History of Farmers Group, Inc.
Farmers Group launched in 1928, not too long after the concept of reciprocal insurance was born. Farmers started out with a mission to insure vehicles for rural farmers.
Founders Thomas E. Leavey and John C. Tyler knew that farmers had fewer risks with their vehicles, but their insurance premiums didn’t reflect that. Determined to give farmers preferred rates, the two went farm to farm to get their first policies and invested their own money into launching Farmers Group. They officially opened their doors in 1928 in a one-room office in Los Angeles.
Farmers is one of the few insurance companies to launch before the Great Depression and survive it. In fact, during the Great Depression, Farmers was able to pay policyholders’ claims in cash instead of I O Us.
How Does an Insurance Exchange Work?
An Exchange is a special type of insurance firm that allows insured parties to exchange covers with other parties. To execute these exchanges, insured parties appoint AIF, which is a third party. The AIF runs the reciprocal’s daily operations and holds power of attorney.
With a reciprocal insurance company like TIE, the risks are spread among subscribers, or policyholders.
Any surpluses from premiums are held in separate accounts that are designated for specific purposes. These accounts can be commingled if needed to pay for claims.
Reciprocal insurance companies can offer non-assessable and assessable policies, though the former is more common.
What Is a Subscription Agreement for Insurance?
A Subscription Agreement is a document that appoints an AIF to perform duties on your behalf in exchange for a fee. That fee is typically 20% of the premium, although less than that amount may be taken.
In the most recent year, the AIF fee was just 12.8% of the premium dollar, and that included 6.7% of AIF profit.
When you apply for insurance through TIE, you will need to sign a Subscription Agreement. Your signing of this agreement is what makes you a subscriber, or member, of the Exchange.
The Subscription Agreement also appoints the Farmers Underwriting Association, or FUA, to handle certain tasks. Per the truck underwriters association the FUA collects premiums, issues policies and handles other tasks associated with running the insurance operation.
FUA is a wholly owned subsidiary of Farmers Group, but it has no ownership in TIE or Farmers Insurance Exchange in general.
What Do Premiums Cover?
According to Farmers Insurance Exchange, premium dollars were spent on:
- Acquisition costs
- AIF fees
- License fees
- Surplus contributions
Subscribers are not responsible for losses that the Exchange may experience, and surplus funds are used to cover losses that exceed claims payments and other expenses associated with the Exchange.
Farmers recently began offering HONK, a roadside assistance initiative that aims to make towing and roadside assistance easier.
HONK allows users to use their mobile phones to submit their location information and the service they require. They can also view the estimated arrival time of assistance and receive updates via text message.
What Do TIE Reviews Have to Say?
Farmers Truck Insurance Exchange is well-rated by consumer advocate groups for coverage, costs and financial strength. In addition, Farmers has an A+ score with the Better Business Bureau (BBB) and no complaints from the National Association of Insurance Commissioners.
There are complaints from policyholders on the BBB, but this is not unusual for a company of this size. However, most issues appear to have been resolved.