How do insurance companies profit?

Question

How do insurance companies profit?

In: 2

Answer 1

two ways.

1. They bring in more in premiums than they pay out in claims and expenses.

2. This is common for most large insurers. They invest the money you pay in premiums and make money from investments. Most large insurers have a combined ratio “premiums/(claims + expenses)” of 1.01-1.03 That is for every $1 they get in premiums they spend $1.03 dollars on claims and expenses. This is why you often get a small discount if you pay everything up front. This gives them more time to make money on the money you sent them

EDIT: auto correct mangled the first one