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wait, insurance companies don't usually make an actual profit directly from premiums? what a world we live in, that's an eye-opener for me.
by oxide 11y ago
wait, insurance companies don't usually make an actual profit directly from premiums?
what a world we live in, that's an eye-opener for me.
- fiatmoney 11y agoThey typically make money from investing the money in between when it's received, and when they pay out claims - imagine a life insurer holding the cash between the start of the policy and the insured's death.
- ant6n 11y agoIf your insurance provider can make money without investing the premiums, then I'd say you're paying too much for premiums.
- CapitalistCartr 11y agoThey typically pay out more than they take in as premiums. But the time from taking money in to paying it out is in years to decades, so they sit on a mountain of money. Warren made the bulk of his money by using that money wisely.
- lmm 11y agoI think it's just an artifact of inflation/growth. They make a profit directly if you measure in constant dollars, it's just that by the time they pay out they're paying out more nominal dollars than they took in in premiums.
- Spooky23 11y agoIt's one of the reasons the most instance companies have been mutually owned until recently. Now they've mostly turned into cash generators for investment banks.
- robzyb 11y ago> wait, insurance companies don't usually make an actual profit directly from premiums? Well, it depends how you measure it. In a basic model an insurance company's profit is: Profit = Premiums + Investment Returns - Claims - Expenses Talking about "profit from premiums" doesn't really make sense, that concept isn't defined. So you can't really say that "insurance companies don't usually make profit directly from premiums". Fiatmoney is simply claiming that Bekshire's insurance operations have Premiums > Claims + Expenses.
- oxide 11y agothank you for the breakdown.