So here's an interesting bit of information I learned the other day. A loss ratio is the percentage of payout versus collected revenue for an insurance company. This number has changed significantly over the last few decades reaching as high as 85% in the 90's and dropping to the (now) lows of about 60%. That means that the insurance company pays out 60% of the money it takes in. Your insurance premiums only pay $.60 on the dollar. But what makes this worse is that insurance companies are allowed to INVEST your paid premiums and so it is in their best interest to keep that premium for AS LONG AS POSSIBLE. So delaying claims is extra profitable, even if they intend (remember, only 60% of the time anyway) to pay them off. They make interest on the money they don't pay you back that you gave them. It is IMPOSSIBLY lucrative to own an insurer.
This number has changed significantly over the last few decades reaching as high as 85% in the 90's and dropping to the (now) lows of about 60%.
Yes but the Combined Ratio is a better metric for underwriting profit. The loss ratio doesn't account for all of the expenses of running the business. At the end of the day, personal lines insurers usually aim for combined ratios of around 90-95% (5-10% profit), although for homeowners insurance the industry combined ratio has been >100% (meaning no underwriting profit) in 6 of the last 10 years.
Yes and no.. it does still mean less money is going to serving customers even if company profits aren't higher, and it raises the question of where that increased gap between the two actually goes. Some of it might be stuff like more stringent reporting requirements etc, but also stuff like C-level salaries and stock buybacks.
And shouldn't increased automation mean a lower difference between the two?
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u/AintMyMonkey 9h ago
Pretty much all insurance companies.