How do insurance companies profit?
In: 2
It’s a numbers game.
You match your insurance rate so that the sum you collect from the people is enough to cover the % people who will file a claim.
You want a ton of people so that there is less variance, and if these people are likely to file a claim you’ll bump up their rate (iE young drivers are more likely to cause a car accident so their rate tends to be higher)
And most importantly, insurance doesn’t sit on the money. Insurance invests it, it uses the capital raised to invest what it got and uses the returns to pay claims and salaries.
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