How do insurance companies profit?
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Actuaries study risk. They monitor vast quantities of statistical data to produce “actuary tables” which describe the likelihood of any number of events befalling a person over the course of their lives.
From these tables, insurance companies calculate the likelihood of a payout for certain events might actually occur, then sets policy rates such that, over specified periods of time, the company will collect more money in policy fees than it pays out to claims.
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