A reciprocal insurance exchange often depends on having enough Subscribers to cover the losses of any single Subscriber. This means a Reciprocal can be risky for the Subscriber if the pool is too small.
In addition, though it isn’t expensive to start a reciprocal, there are costs that still must be covered, such as the payment for the AIF, and any organizational costs. When the pool is too small, these costs may raise the prices of premiums for Subscribers.
You also need a committed group to agree to pool losses together and go through the steps of creating a reciprocal. This is why existing Reciprocals focus on certain groups or associations, as this enables them to have a large pool of Subscribers, lowering the risk of all of the policyholders in the pool. Once a reciprocal pool is large enough, the Subscribers feel they have the same security as any other type of insurance purchased.