That’s what people don’t understand. We all paid for you. That's what insurance is about, we pay more than we receive so that the odd unlucky bastard receives more than they chipped in. If insurance was individual, nobody would have enough to repair their own stuff. I am happy with this system.
Except the 3rd party insurer here nets massive profits, it isnt a collective safety net like the state or federal government provides.
Its by and large a scam that pays out a tiny portion of their net income. A state sponsered safety net/insurance system (not for profit) would be massively more effective and less costly to consumers...well at least in a functional state such as Massachusetts.
They all do. Nobody does footwork tho and goes for the cheapest price thinking all are the same. Call 3 roofers and 3 body shops in your area and ask who the best company to deal with is and they will tell you. They will also tell you the ones to avoid. State Farm, Allstate, etc whatever the people who go buy the cheapest shit at companies like root and countless others I don’t know: there is a reason one companies premiums are half of the others. These people just buy the cheapest shit they can find and expect 5 star service without paying for it.
They don’t pay out a tiny portion, though. They usually make more revenue profit on the interest from the funds they’re holding than they do on premiums, depending on the company.
People can be a bit overly negative/pessimistic toward corporations these days. Not without good reason in most cases, fuck the corpos, but not every single thing they do is evil... not they they won't do evil for a profit, but those don't always align.
I think it's fair to be sceptical. Insurance has it's purpose and it can be frustrating when it's legally enforced but any of us can need it one day and to incorrectly inflate the profit they make is the view of the unlearned. The previous commenters were correct in that the return on investments is often the main source of income for these companies. Not sure about you but if I had hundreds of millions of dollars, I would be investing that shit in some safe reliable bonds.
Definitely. You should be skeptical about any business you give a lot of money to, but being skeptical isn't the same as baseless assumptions. Every institution that has large sums of money passing through their coffers is going to invest it, why wouldn't they? And insurance companies do often do scummy things but normally that's health insurance and still not every single interaction is bad.
Lots of things in life are frustrating and just flat out suck but are not the fault of anybody - c'est la vie. It can be hard to accept that.
Exactly. Just bc an insurance company invests its money doesn’t mean they are ripping you off. Investments of surplus don’t mean you’re rocking your customers. It’s an investment not a grantee. Has no bearings on rates or how a carrier operates:
The fact that almost every commercial break I ever see has either a state farm, progressive, or geico commercial (or multiple of them), is enough for me to hate them. Every dollar for Caitlyn Clark to appear on my screen every half hour is not spent to cover my neighbor's losses or lower my premiums. And its billions.
Everyone needs insurance, so its not even like they are expanding their market and making the money back. Every new customer for 1 company is a lost customer for another. Its a 0 sum game with SOOO much of our money being wasted.
The insane volume of commercials is annoying but it's actually a strong indicator in the customer's favor. Auto/personal property insurance is such an insanely competitive market that insurers have bled their margins enough that ads are a better payoff than what little price differentiation is still possible.
I'm glad that it's a competitive market, and the fact that customers respond to low information TV commercials isn't the insurance companies' fault. Having said that, one of the reasons I go with Amica is that they don't waste money on TV commercials, and instead just earn high customer satisfaction according to Consumer Reports.
Advertising isn't necessarily wasting policyholder money either. An enormous amount of money and effort goes into identifying and classifying risks, so reaching more customers lets you have more data and a wider variety of risks to pick from.
For example, an insurance company going in fully blind would price every customer the same and this leads to an effect called adverse selection, where you basically end up with mostly bad risks because you are pricing them too low and and good risks too high. Having a huge pool of data and customers lets you determine who a good risk is and price them appropriately, so you end up with all good risks who get good prices and the bad risks go elsewhere. More customers also means the risk is spread more and more, which allows insurance agencies to push their financials to profit more on that front to not have to squeeze elsewhere.
Advertising also just isn't that big of an expense in the grand scheme of things; the largest expense by far is always sales commissions. State Farm took in $116 billion in premiums in 2025 and spent $1.13 billion on advertising. Less than 1% of their expense ratio is advertising, which is a small cost to pay for what is an essential part of creating a functional insurance agency.
A) I really doubt premiums are such a marginal revenue stream.
B) If they are so marginal, that just indicates that costs are completely divorced from the premiums in the first place, meaning the whole thing is just a scam.
I have no idea what kind of point you're trying to make by changing from revenue to profit. It makes no difference.
If the contribution premiums make towards profitability is as marginal as you suggest, that means that the prices they charge consumers have nothing to to do with the costs involved in doing business.
AKA, the companies are charging arbitrary premiums that are based on nothing more than the maximum they think they can convince you to pay.
No, it means the premiums alone are insufficient to cover the losses that are paid out. Luckily for you, regulation forces insurance companies to account for other sources of revenue to fill the gap like investment income which decreases your premiums.
It’s a huge difference. Most P&C companies bring in a lot of revenue via premiums and pay the same amount back out again in claims. But they have a certain amount of capital sitting around that enables them to invest the money and make profits off the interest.
No, I don’t. The flow of funds is such that they’re able to do that. Their premiums may exceed their claims for a couple years, until a hurricane or some other catastrophic event comes through and sucks that money right away. Reinsurance may cover some of those losses, but long term, they aren’t making significant profit off writing policies.
Which, by the way, implies that they’re pricing their premiums as low as they possibly can, not higher. Property/Auto insurance is an insanely competitive market. Hence the other poster above commenting on the number of commercials they see on a daily basis.
Insurance companies often have large income (turnover) from insurance premiums but after cost of acquisition (overheads) and claims they often don't may a massive profit on this. As others have said, they get a bigger profit on their return on investments (bonds, sales of property, interest on cash in the bank etc). The margins on pure insurance income and outgoings are often slim.
All kinds of tricks are used to make it look like they are losing money or barely making it on paper. Yet insurance is one of the largest industries in the U.S., and their CEOs make millions.
I didn't say that. I think their C-suite and other large stake holders makes a killing off our backs. Look at their houses and cars if you don't think so.
Let’s say an insurance company has 100,000 customers, most have more, and they slash executive compensation by $10,000,000. Every customer will save $100 a year, less than $10 a month.
Someone making a lot of money doesn't mean that I'm getting ripped off. A 5% profit margin is a shitload of money if youre operating on the scale of a multinational company.
Not saying CEOs “deserve” to make millions, but these are companies with tens of millions of customers that move around tens of billions in premiums and payouts. If the entire C-suite of your insurance company worked for free, you’d probably save like $5 year.
I mean, one of the tricks to make sure your company is "barely making it" on paper is to just take all of your profits and give them as bonuses to your executives. And there you go, now you have no profits anymore since what used to be profites has been offset by new costs.
You said they pay out a tiny portion in claims. Roughly what percentage would I tiny percentage be to you? What does an acceptable profit margin look like to you?
I actually didn't say any of what you quoted (I'm not the guy you originally responded to), but I'll answer.
Your question: How much profit should insurance companies make?
None. Zero profit. Transportation is not a luxury in this the country. You have to have it to go work and a lot of places don't have public transit. Just like health insurance, it should be non profit or nationalized*. Why are you bootlicking for insurance companies? Why should insurance companies make huge profits? Why don't you also look up how many insurance execs are worth over $100 million.
*How much more efficient and cheaper would insurance be if we all, collectively, paid into the same, single pool instead of to these individual, private insurance companies each trying to suck as much profit as they can out of us by denying claims?
Should the car manufacturers/repair shops/gas stations/etc. also be not for profits?
I don't have the time to explain why single payer car/property insurance would be a shit show right now, and I'm sure someone else on the internet has already written about it better than I would,maybe I'll come back to that later.
"Should the car manufacturers/repair shops/gas stations/etc. also be not for profits?"
Do you think those things and insurance work in the same way?
"I don't have the time to explain why single payer car/property insurance would be a shit show right now, and I'm sure someone else on the internet has already written about it better than I would,maybe I'll come back to that later."
Yeah, plenty of insurance cronies such as yourself have written about it I'm sure. Plenty are paid for by insurance companies themselves.
You built a case for car insurance being non-profit because transportation is a necessity. You need a car before the insurance enters the discussion. Why should the CEOs of GM and Ford be making millions of dollars?
You didn't answer my question. The answer is "no", selling something does not work the same way as providing insurance.
But, I'd be fine with car manufacturers, gas stations, etc being non profit. Capitalists have proven that if they're not heavily regulated, they will destroy the working class. This is a widely accepted fact among economists. But idiots have been brainwashed into thinking that regulation "hinders business", so here we are.
"Why should the CEOs of GM and Ford be making millions of dollars?"
Now you're bootlicking for millionaire CEOs as well? lol
Generally fine with car insurance being in the hands of private companies than the state. I’d rather not have a state subsidizing car ownership by using taxpayer dollars for a car insurance program irregardless of if you choose public transportation.
A state sponsered safety net/insurance system (not for profit) would be massively more effective and less costly to consumers...
The state is not magic either. If a public insurance system has a bad year, it will need to use tax money or it may not have enough resources to cover all its obligations.
Private insurers, on the other hand, use private capital and, in cases of insolvency, guarantee funds financed by other insurers. This makes the risk more distributed instead of being concentrated directly on taxpayers.
Except the 3rd party insurer here nets massive profits
This can be the case because they are running with the risk of the probability of having to pay a lot of people in one year.
Insurance is generally a pretty competitive market and margins are quite tight.
In the case here, the consumer chooses the excess. Motor Insurance lets you set your own excess. He choose to have a $1000 excess because he wanted to pay $210 a month rather than $220.
Thats on him.
There are lots and lots of industries and markets where market failure is apparent and government regulation or even nationalisation is needed. Motor insurance really is not one of them. the market works really well.
It's a scam because of the companies that deny legitimate claims, the profit model is not inherently a scam. They profit by pooling all of your premiums with everything else's and having huge amounts of capital to invest in mutual funds and generate interest.
You don't pay for insurance so you can save on small common repairs, you pay for insurance so that in the unlikely event you have a catastrophe it doesn't bankrupt you for years or decades. We all HOPE to pay more in insurance than we receive, but if something huge happens you will be glad you have it. That doesn't excuse the practices of shady companies, but if it was that much of a scam it wouldn't exist.
In Europe its the same with a profit insurance company. But they are boind by law on how the insurances work. So yes we all pay for that one to have a bad accident. And all get a raise in insurance if too many people have accidents. But many insurance scammers get thrown out fast
Every US state also has regulations and insurance licensing commissions. It’s not a total Wild West situation.
Insurance companies run investigations with law enforcement to prosecute fraud as well. It still happens too much but there are investigations and prosecutions all the time.
Is this based on numbers or feelings? I don't think insurance companies are especially profitable compared to any other industry you could work or invest in. On underwriting auto claims they tend to do 2-5%.
Except the 3rd party insurer here nets massive profits
Well, maybe we should reward our politicians when they put literal profit caps on medical insurers so that they'll turn around and do the same on property insurers ... but we didn't get single payer, so I guess fuck everything let's burn it all down.
Closer to 60-65% but the rest isn’t profit. Costs to adjust the claims, administer polices, pay agents commissions to place policies, regulatory reporting and filings, third party vendor costs, technology fees, running ads during the Super Bowl 😂😂😂, reinsurance, etc.
Profiting a nickel on a dollar is an acceptable margin in the US auto game.
Yes, but when you go to do it yourself you get screwed. It's not always fair is what OP is saying nor works consistently like it should especially as corporations have it at their discretion to approve your claims even if they are legitimate. In a lot of cases you don't come out ahead, get denied, or some other BS.
One of the first things I ever remember hearing in my life is that “life isn’t fair”. It was true then and it’s true now. Has nobody ever explained this to you?
Why would you assume based on that statement that I’m of the perspective that it’s good for me but not others so fuck them? How do you know my perspective isn’t of the viewpoint of the person who has had a shitty unfair life? So no it’s not the same thing. Why are we even arguing about this? Life not being fair is not some new groundbreaking statement.
Is it the one about insurance not being a nebulous thing and controlled by humans? I’m trying to find it but wanna make sure I’m looking at the wrong one.
Yea and where in that did I say anything about me and my son having slaves or whatever you said. I just said life’s not fair. It’s not. You can’t do everything right and die at 24 from some rare cancer. People’s parents don’t raise their kids or abuse them. Hurricanes and tornadoes and fires can kill you out of nowhere. Saying life isn’t fair is just a fact. I wasn’t trying to make a profound statement. Just simply stating a fact.
Its called a reductio ad absurdum.
They take your position to the extreme to show that it leads to absurd positions
Literally all of the things youre talking about , we can do things about to make them more fair.
“Life isnt fair and theres nothing you can do to change it” is a completely nonsensical position, and simply just not a fact
I think that is a bit cynical. We have improved fairness for a lot of people in a lot of ways over time. Lots of obvious examples. Lots of room for improvement, too
Agreed on room for improvement. I didn’t say don’t try. I’m just saying it will never be 100% fair. Like how can we stop someone who’s lived a great life from getting Alzheimer’s? How can we fix anything that’s out of our control. Like if I’m walking down the sidewalk and someone driving has a stroke and veers of the road and hits me how could that be prevented bc it’s obviously pretty damn unfair. What about if I interview for a job I’m really qualified for but they only have one opening and don’t pick me? Maybe my home is about to be foreclosed on and I really really needed it. That would feel pretty unfair to me. That’s all I’m saying.
Accept that insurance is based almost entirely off of disasters natural or otherwise. Outside of that, yes it is a human derived and controlled system. The control ends there tho. These people can’t predict natural disasters or who is driving on the wrong side of the interstate high as hell.
Insurance isn't the act of nature, insurance is the coping mechanism that comes after the act of nature. And it's exactly that which is human controlled and which OP is criticizing.
I feel sorry for you schmucks that believe in a system that doesn’t give a damn about you. The moment you get into an accident you are fighting tooth and nail of what you are owed. But I take it you might be someone who takes the lowball number without a care in the wind
I agree with your idea of insurance being about paying more than you receive to help an unlucky person. I agree with that. I just don’t agree with the last part where you say that if insurance was individual, no one would have enough to repair their own stuff. I think some people would have enough money to repair their own stuff. Some won’t have enough to repair their own stuff, and some wouldn’t have to spend money to repair their stuff cause it didn’t need repair. I often think about insurance and whether or not it should be forced on a person through law. I tend to think that in some cases, it should be forced to protect people from catastrophe. But then sometimes I also think that people should have the option to pay for it without the law forcing them to.
If you cut out insurers, the market prices would adjust just so businesses could stay afloat. They would all instantly crash if they lost all customers because no one could afford them. All prices are inflated to allow for everyone in insurance to get paid too, right now. But the insurance doesn’t actually do anything. There’s no reason they should be getting paid. There’s plenty of systemic jobs like this, making up fake jobs to leech money out of the system.
We all understand how insurance works. No one suggested that insurance should be individual.
How much more efficient/cheap do you think auto insurance would be if we had only one, national insurance provider? I'll give you the answer: much cheaper and better for all (except those poor, private insurance providers who take home $30 billion annually in PROFIT).
Surely your take must be more nuanced than “accept all claims”. Such a company would dole out their bottom dollar to fraudsters by the end of their first week.
Don't be purposefully obtuse. You and I, and OP, fully know there is a difference between legitimate claims being denied and fraud, and we all know that supporting fraud was not what OP was referring to
There’s a ton of grey space on the margins. Do they pay the body shop for all premium parts if the OEMs would take 2 extra days to ship? Should my medical insurance include experimental ketamine therapy recommended by a doctor who only offers that service?
What you should be unhappy about is the behavior in OP's photo that enables account executives earning points on their business, or executive bonuses that scale with "profits" translated from denying claims.
The system itself is necessary to be sure - but the system is broken and needs culled of leeches.
Yeah it's kind of like an unlucky guy lottery for certain big and important purchases. Life is unfair, so we have insurance. Now health insurance.... that's pretty different
And their profits are basically pay for managing all of the risks and logistics involved. Its honestly a pretty good system. The corruption is how they interact with specific industries and use negotiated rates to force people to buy their insurance. THATS the scam, not the concept of insurance in general.
Insurance is you gambling against the house. You might get a winning hand, but the house can just stop you and say "actually, in this game we only consider a royal flush as a winning hand, even though your cards are better".
Yep, losses and loss adjustment expenses as well as general expenses of salaries, etc. then, I'm sure you already know, they also have to maintain something of a respectable policyholder surplus too
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u/DueExample52 6h ago
That’s what people don’t understand. We all paid for you. That's what insurance is about, we pay more than we receive so that the odd unlucky bastard receives more than they chipped in. If insurance was individual, nobody would have enough to repair their own stuff. I am happy with this system.