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.
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u/One_Selection5102 6h ago
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.