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This is believed by many people on HN. It's false. A thing you might find useful to look at: loss ratios. Loss ratio is industry jargon for claims paid plus c
by patio11 10y ago
This is believed by many people on HN. It's false.
A thing you might find useful to look at: loss ratios. Loss ratio is industry jargon for claims paid plus claims-related expense over premium income. GEICO's, for example, is 82.1: for every $1 in premium they take in, they pay 82 cents in claims.
The industry is regulated to a degree that few are, in both the US and Japan (and many, many other countries). If your loss ratio is too low, your friendly neighborhood insurance regulator will not look favorably upon that fact.
- cmdrfred 10y agoDid you know the original model for insurance was to get a loan for enough to cover your clients losses and charge them premiums enough to cover the cases where a payout is required plus the interest on the loan? To make a profit you would invest a portion of that capitol as not everyone's house will burn down at the same time. That all changed in 1945 when The McCarran-Ferguson Act exempted insurance companies from antitrust law and then companies began sharing information to set prices, now they make around 20% profit on the premiums as well as you cited.