How Insurance Companies Drastically Make Money Overtime

By | March 19, 2020

Most times, it has however been argued within different individuals that since insurance companies are there to help the people who signed a contract with them to help protect their properties, lives, businesses, schools as well as employees;

  • What are the different ways these insurance firms cover-up and make profits?
  • If insurance companies have been argued not to be profit-making organizations, how come do people want to venture into insurance firms as well as the government having the same idea?
  • What are the possibilities of these firms making their own money in protecting the lives of others?
How Insurance Companies Make Money

Insurance Companies Are Not Charity Organization: See How They Make Their Money

These questions and many more will be answered in this article as this will reveal the true reasons as to which these various insurance firms make profits as well as generates fund.

Research has shown that no one has come to a full explanation as to how these insurance firms generate as well as make money but in accordance with Mr. Enright, he postulated that people seem to be more concentrated on the Premiums and the Claims as the ways insurance companies make their money. However, this is not a genuine way to how these insurance firms generates their money.

Most insurance firms try to price their policies in such a way that the total [premiums collected each year are equal to the total amount of claims paid including their unexpected expenses. A combined ratio of these assertions seems as real because it reveals the truth that most insurance firms are not over or underpricing their policies.

When an insurance firm collects premiums, they put that money it no an investment pool that will yield further income so as this will cover certain expenses when the need arises. When a claim is made by an insured, money is therefore been collected from that pool and placed or paid into a cash account to pay for the claims as long as the adjustment of such claim is completed. Where insurance firm makes their money now is on the interest generated for the investment pool. The idea of every ideal insurance firm is to ensure that money comes in regularly to the investment pool, thus; they send marketers who could help convince people to come and get insured so that they could have more premiums coming in to invest in the investment pool knowing fully well that the funds coming out from there is what is used to generate funds for the firm. So, the profits are made from the investment pool.

PEOPLE ALSO READ: Food for Thought About State Farm Insurance

Leave a Reply

Your email address will not be published. Required fields are marked *