Surplus contributions explained
When you get a policy from the Kin Interinsurance Network or Kin Interinsurance Nexus Exchange, you’ll notice your policy includes a “surplus contribution.”
The surplus contribution is 10% of your premium and acts as a buffer for claims. It’s purely an extra financial safety net. We don't make any money off of or take a percentage of this contribution.
Ultimately, a surplus contribution can save you money over time. The more reserves we have to pay claims and cover operating costs, the lower we can keep our prices.
Plus, both the Kin Interinsurance Network and Kin Interinsurance Nexus Exchange are structured as reciprocal exchanges. That means our policyholders actually own the company, while an attorney-in-fact manages it for a set percentage (again, we don’t touch the surplus contribution).
Depending on your policy, the attorney-in-fact for our company is either Kin Risk Management, LLC or Kin Risk Management Nexus, LLC.
Because the fee is fixed, we aren’t incentivized to raise rates to increase profits to appease shareholders – our obligation is only to you. When you buy a policy, our “subscriber agreement” explains this relationship and the surplus contribution.
State regulators approved the surplus contribution, and while you can’t opt out of it, it’s refundable on a prorated basis if your policy is canceled.
What is a policyholder surplus?
A policyholder surplus is an insurance company’s admitted assets minus what it owes in claims. This is a strong indication of an insurer’s financial strength and capacity to write new policies.
A greater policyholder surplus means a company is financially sound – it has more assets than losses and can easily pay claims. And surplus funds can be used for exactly that: paying for claims that exceed what reinsurance covers (and it covers a lot). In fact, our reinsurance program is so strong that the probability of surpassing these reserves is incredibly rare. Only once in every 160 years would we expect one event to exceed our program.
What are subscribers?
Policyholder and subscriber are interchangeable terms. But because a reciprocal exchange is a true peer-to-peer insurance company, policyholders are often called subscribers or members. It’s a hat tip to the fact that when you buy a policy from a reciprocal, you are part of the company. You and your fellow subscribers are actually insuring each other, technically speaking.
The Subscribers’ Advisory Committee (SAC) protects your rights as a subscriber – you can expect us to take the required surplus, manage funds based on fiduciary rules, and conform to the subscriber agreement. Plus, the SAC ensures you have an active presence in all that we do. Think of this committee as your sounding board – they listen to your feedback to guide decisions in our resources, our improvements, and our path forward.
