We’re different from other insurance carriers. Federated is an insurance exchange, with a structure that’s very similar to a cooperative. The Seven Cooperative Principles guide our operations. Co-ops insured with us are members who participate directly in our operations by electing our Board of Directors.
We don’t work through agents or brokers. Our account executives are Federated employees. Their responsibility is to explain your coverage, help you minimize your exposure to risk and be sure you have the right coverage. They’re familiar with your challenges because many of them were employed by cooperatives before working at Federated. All claims and administration are handled at our office, by Federated personnel – people who know you and understand cooperatives.
We focus on providing services at an affordable cost to our members. Our goal is to operate with a combined loss and expense ratio of 100 percent. In other words, we aim to collect enough in premiums to pay claims and our administrative expenses, which historically are about 13-14 percent. Operating on a break-even basis from our underwriting operations allows our investment income to take care of unexpected events or unforeseen circumstances. If nothing out of the ordinary happens, then the investment income is returned to our members in the form of patronage capital.
Our investment strategy focuses on the long term. We use our surplus growth as a cushion against the unforeseeable – a high number of claims due to natural disasters, for example – so we don’t have to overreact and increase pricing dramatically.
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