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>Also how could insurance ever be a "for profit" business? What? They plan to take in more in premiums than they pay out in claims by managing risks and underw
by hattmall 2y ago
>Also how could insurance ever be a "for profit" business?
What? They plan to take in more in premiums than they pay out in claims by managing risks and underwriting.
In that sense it's like a bookmaker who plans to set a line on a game that results in bets not having an imbalance that outweighs their vigorish. In cases where they do they lay off bets on other bookmakers. It's why they tend to be concentrated on certain areas and the same is true for insurance.
Both of those are legitimate for profit businesses that use statistical modeling and risk management to turn profits and provide value to customers.
- baruz 2y ago> take in more in premiums Also, prudently investing the insurance float (excess premiums beyond that needed for claims)
- klyrs 2y ago> prudently investing the insurance float More gambling! What I find interesting about this question is that insurance companies are the real gamblers. Attempting to frame their clientele as gamblers approaches absurdities such as a limited opportunity to spend, and most importantly, a strict cap on "reward" lower than the cost to "play" (entry fee for a new car is the policy rate plus a car of equal or greater value). Whereas insurance companies are gambling on both ends: with their customers' potential losses and with their float on the investment market.