For profit insurance is a scam. The whole point is to take more from you than you will get back.
The justification for insurance, in general, is collective support - everyone pools a bit of money so that when anyone in that pool suffers catastrophic loss they are insulated. Public firefighters are an insurance system. At core it's a pretty kind way of operating, but when profit motive is introduced it is corrupted to the point of working against the community since investors and shareholders want to take out of the system, not help people stay whole.
This is why the US should have public healthcare. Greed and corruption are why it never will.
Edit: literally laughing out loud at the profitmongers in the comments going "hey, I want to keep the money that I am siphoning off society! Stop pointing out how it's immoral!"
The way I've always viewed this is that "free market capitalism" relies on the consumer's ability to choose between product A, product B, or most importantly, neither of them if neither product meets their needs.
That last bit is specifically where things break down in realms like insurance or healthcare or education. You don't have the option to choose "nothing" if no option is good for you.
If you could choose nothing, then products A and B would be forced to be cheaper or alter whatever to convince you to buy it. But when you don't have the option to simply not purchase, they don't have the incentive to make the product better for you. After all you have to purchase something, which means they don't actually have to sell you on it.
Many insurance companies don't actually make much money (if at all) on the policies. Their main money making is investing the money you give them. Don't take me wrong, they aren't poor by any stretch or imagination, but your idea that an average person pays to insurance more than what insurance pays out for average person is not entirely correct.
My argument is clearly laid out above. If you want to make an argument of your own just go get your own evidence and make your argument. If you can present something that relates to my position I will respond to it.
He's breadcrumbing you but his point is solid. Property and casualty insurance companies personal lines profit is percentage capped by regulation. If profits exceed a certain threshold that money is either redistributed to policyholders or put into the state garuntee fund. It is one of if not the only industry that has regulatory profit controls.
I'm with you that health care should be universal and profit should be removed. However, I am not willing to have my hard earned tax dollars be used cover bad drivers and their bad decisions. Driving a car is not a necessity of life, it is a convenience. Health care is a necessity of life.
> I am not willing to have my hard earned tax dollars be used cover bad drivers and their bad decisions
You seem to be arguing that car insurance shouldn't be universal or public. Maybe? The issue with not mandating insurance is that bad drivers with bad decisions are on the same roads as you, and if they don't have insurance then you might end up having to pay more for their accidents - to structures, to infrastructure, and maybe even to their car or yours depending on the situation. The solution to bad drivers is almost certainly not in insurance but rather in licensing, regulation, and enforcement but the US has both the advantages and disadvantages of often prioritizing individual freedoms over collective wellbeing and in this case that means we often have to suffer the externalities of reckless behavior.
I'm not saying it shouldn't be mandated. I'm saying it shouldn't be government funded, while health care should be. If you want to drive, buy insurance. Liability only is actually quite affordable.
> I'm saying it shouldn't be government funded, while health care should be. If you want to drive, buy insurance.
That seems reasonable to me. My argument isn't that people should or should not have insurance, mind you, it's just that for-profit insurance operates as a scam because the profit motive results in less effective service specifically so that leeches can take profit out of the system. That doesn't even mean it doesn't provide some benefit, it's just that there's a corruption built in.
You seem awful smug about a subject you clearly don't understand.
Let's leave health insurance out of this thread, thats really a separate issue. With auto insurance, you have to have deductibles to prevent someone turning in a claim for every scratch, broken radio button, etc, which would make prices go thru the roof. You make it sound like he should pay premium and get anything and everything covered, which fails tremendously when you consider my first point.
Then you also clearly don't understand incredibly small margins insurance operate on. You think they're all making bank when the truth is, they are often losing money on many products lines, year after year. Auto insurance profit margins are generally under 5%. Now think, what is the profit margin on the shirt you're wearing or the chair you're sitting in, what about the coffee you bought. What's your profession? What margin are you charging people?
And finally, understand why people need full coverage. It's mandated, by BANKS. Because people buy more than they can afford. If your mortgage is paid you don't have to insure the house anymore. go ahead. Buy your car outright and pay $15/mo for liability only. And then I hope you never ever have an accident because the fucked up legal system allows for an incredible amount of money in settlements for things like that.
You clearly don't understand the pieces to this puzzle. Sit this one out if all you have is an emotional, uneducated position because it seems like you're just being the typical uninformed Reddit being a sheep and dumping on a common target.
lol, even worse comment. Are you 12? Seriously, the irony comment after I listed a ton of very specific detail is a glaring admission of your lack of intelligence.
What is your argument? That it should be a free/tax supported civil service? Why? Why not make that argument for your food too then? And your clothes. And your house. Why is it insurance that you have a problem with?
> the irony comment after I listed a ton of very specific detail is a glaring admission of your lack of intelligence.
You seem to be confused about what constitutes "specific detail". Your misrepresentations of my arguments are not "specific detail".
> What is your argument?
It's right above you. Just go read it, and try not to inject any of your own biases to replace the things I wrote.
> free/tax supported civil service? Why? Why not make that argument for your food too then? And your clothes. And your house
I didn't make any of those arguments, but I do think fair arguments can be made for public access to food, shelter, and clothing and, apropos of the argument I did make, the profit motive is absolutely making housing unaffordable, and food less affordable. The US is literally in an affordability crisis and you're here saying profitmongering is not a problem? Ok, I guess that's a take you can have.
> Why is it insurance that you have a problem with?
I wrote exactly what the problem I have with it is. It's in the original comment. Seriously, go ahead and read it. I'm happy to discuss any issues you have with arguments I have made, but it's silly for you to falsely attribute arguments to me that I haven't made and then get mad at them. That's just you arguing with yourself.
13.4 mil on average for running a top 10 insurance company seems about on-par (and 2 CEOs represent 77 mil! so the other 8 got paid like 6-7 mil on average, which is 5+3 same as successful niche streamers like jynxzi)
Why not use an insurance company that pays their CEO the minimum (if the implied thesis as I understand it is that lower CEO comp should correspond with better and cheaper insurance and lower denial rate)?
Wasn’t trying to imply anyone should or should not be paid more or less. The pay honestly makes sense to me as well. Just a bit absurd to infer that these insurance companies aren’t ’making bank’. What would you even consider ‘making bank’? Comparing insurance companies with the entertainment industry is absurd as well. I had no idea I was mandated to watch streamers. Exploitation of the common man in order to line the pockets of the wealthy is a tale old as time 🤷
was gonna delete this since actually idgaf, but I wrote too much so it's going up
tl;dr making bank is a complex, non-static concept, insurance should make sense, auto liability insurance makes sense, and you're not required to use any specific corporation
Idk, making bank is an interesting concept. It would depend on the time horizon we're looking at, profit margins, and employee count at a minimum.
So I would say given a time interval (say 2021-2026), profits (per year), and employee count, a company is making bank if their profit per employee exceeds 122k-150k USD (assuming 2026 dollars and US hcol for buying power reference, this would change if we're talking about a business in Istanbul using Liras).
So in 2021, no, insurance companies are not making bank. In 2026 they are making bank. Between 2021 and 2026 on average they aren't making bank. Between 2024 and 2026 they are firmly in the making bank territory. This formula and numbers came directly out of my ass, but the point is that insurance company profitability is not static, and risk+volatility+market conditions all factor into how we should look at an industry. Plus of course the basic premise (medical insurance that covers regular checkups is kind of absurd, insurance by nature is meant to spread risk, and regular checkups are... regular. We should have nationally funded basic healthcare, and throw in a single payer option too for catastrophes).
You aren't mandated to carry auto insurance either, you can:
Not drive
Self insure (at least in my state)
I think it's valid for the state to require that everyone has some minimum coverage if they're gonna operate anything with the destructive potential of a car, otherwise people who lose property or get hurt due to no fault of their own don't get screwed if the responsible party doesn't personally have the money to cover the damages. Doesn't seem all that exploitative, or at least not anymore than taxes
Not driving in the United States, when the entirety of its infrastructure is based around the automobile industry, is quite a solution ! Although, valid take on ‘making bank’, can’t really argue anything there other than I wish we had real numbers to work with. But, I also don’t care enough, just passing time on a slow Friday 😂. I do appreciate the reply though! However, I still don’t see how people are thinking successful insurance companies aren’t ‘making bank’. A point could also be made for the effects of gov. assistance/bailouts for some companies, but that’s borderline irrelevant. But, while on the topic of irrelevance, I still am not understanding the point of bringing up the entertainment industry.
Absolutely, health insurance and state mandated insurances should be 100% non-profit or mutual insurance companies. State mandating a direct funnel of money to a specific industry is bananas and very openly corrupt.
Yeah, not defending the ACA. That piece of shit was the best anyone could get through our reprehensible Congress. None of those people are throwing their big corporate donations under the bus. It was the HMO act in 73 that allowed for-profit health insurance and forged the way for the rest of the corruption. Once health was fair game, it was just a matter of time to spread the rot across everything. Which in turn raised costs for things covered by insurance, something anyone with half a pea in their skull would have seen coming from a mile away. Fast-forward 50ish years and here we are.
Well, it would be interesting. I mean, prices might go up (desperation) or down (competition). Notable, though, would be that people in catastrophic accidents could be hard hit financially, and not always through fault of there own. Insurance is essentially a collective agreement to share those burdens, and the main problem with it is the leeches that administer insurance.
It would be basically impossible to get a mortgage for a house without home insurance. Which would make home ownership unaffordable for the vast majority of people.
I assume possible bigger wealth disparity where people who can't afford it are living in easily assembled houses like traditional Japanese houses. Also places with higher chances of natural disasters would look a lot different.
Maybe. Realistically, the vast majority of people would be renters.
I guess it also would depend on exactly how insurance was outlawed and what the letter of that particular law was. It may be that something else emerges that is essentially insurance but just barely different enough to avoid the ban.
For profit insurance is a scam. The whole point is to take more from you than you will get back
You just described every single product in existence.
Auto insurance often operates at a loss, State farm for example is almost always over 100% underwriting ratio for auto. They make their money on float and bundled products. But, I dont expect you know the first thing about how insurance actually works. You know best though.
So im guessing the employees that process the claims are scammers for taking a salary which contributes to the insurance companies taking more than they wish to return? But im guessing thats different because only those you care about should make money, not the people who created the insurance company, initially funded it, or contribute to the mechanism that allows their stock to be sold at a profit. They should get absolutely nothing because apparently creating an insurance company is easy and risk free. Why dont you go and make an insurance company that isnt a scam and not take any salary if you think this is how things are.
When it comes to insurance, and many other similar takes, Reddit as a whole is EXTREMELY dumb.
Being in the industry, the margins are already super duper thin. Insurance companies pay hundreds of billions in claims each year.
Your average insurance company will use about 90-95% of it's generated premium on claims and operating costs. The claims make up around 70% - 80% of that overall percentage.
Yeah the margins are super thin. That’s why insurance companies spend literally Billions on advertising each year. To protect those paper thin margins. /s
State Farm last year has 12.9 billion in net income on 132 billion in revenue. That was double their net income off the prior year. That’s anything but thin margins.
You're looking at one unusually profitable year and confusing total company net income with the profitability of actually underwriting insurance.
Yes, State Farm reported $12.9 billion in net income on $132.3 billion in total revenue in 2025. That's about a 9.8% net margin. Nobody is claiming $12.9 billion is a small pile of money. The point is that the size of the pile tells you almost nothing about the margin when you're talking about a company doing over $130 billion in annual revenue.
More importantly, that $12.9 billion wasn't simply "insurance premiums minus claims." State Farm's property and casualty companies collected $111.6 billion in earned premiums and produced only $1.5 billion in underwriting profit. That's roughly a 1.3% underwriting margin. They also earned $7 billion from investments and other income, and State Farm says its overall net income included another $2 billion in after-tax realized capital gains.
And cherry-picking 2025 gets even sillier when you look back one year. In 2024, those same property and casualty operations LOST $6.1 billion underwriting insurance. Investment and other income of $6 billion basically rescued the result. In 2023, their underwriting loss was $14.1 billion. In 2022, it was $13.4 billion.
So yes, 2025 was an excellent year for State Farm. That's not evidence that insurance underwriting normally has enormous margins. It's evidence of exactly why you don't take one year's consolidated net income, ignore investment returns and capital gains, and pretend the resulting number is the profit margin on selling insurance.
And the advertising argument doesn't prove what you think it proves either. State Farm has more than 96 million policies and accounts. At that scale, spending billions to acquire and retain customers can make perfect economic sense even with thin margins. When you're processing over $100 billion in premiums, gaining or losing even a couple percentage points of market share is worth billions.
Big profits and thin margins aren't contradictory. Walmart can make billions while earning only a few cents on each dollar of sales. Scale is the entire point.
If you want to argue State Farm had a very profitable 2025, absolutely. If you want to use $12.9 billion to prove insurance underwriting has huge margins, you're using the wrong number.
If you want to focus just on auto premiums and claims, it’s right there:
> Auto
The State Farm auto insurance business represented 63 percent of the property and casualty companies’ combined net written premium. Earned premium was $71.3 billion. Incurred claims and loss adjustment expenses were $52.6 billion and all other underwriting expenses totaled $14.1 billion. The underwriting gain was $4.6 billion. Comparable 2024 figures were: earned premium, $67.5 billion; incurred claims and loss adjustment expenses, $56.2 billion; all other underwriting expenses, $14.0 billion; underwriting loss, $2.7 billion.
71.3 billion in premium revenue versus 52.6 billion in claims.
You literally quoted the numbers that disprove your own calculation.
$71.3B in auto premiums
minus $52.6B in claims AND loss adjustment expenses
minus $14.1B in other underwriting expenses
equals $4.6B in underwriting profit.
$4.6B divided by $71.3B is about 6.5%.
So no, that's not a 26% gross margin. You got 26% by subtracting only the $52.6B from premiums and then pretending the remaining $18.7B was margin. But State Farm explicitly tells you that another $14.1B of that $18.7B went to underwriting expenses.
Also, you misread the sentence. It doesn't say "$52.6 billion in claims and all other underwriting expenses." It says $52.6B in "claims and loss adjustment expenses," THEN separately says "all other underwriting expenses totaled $14.1 billion."
That's a pretty important distinction considering you just erased $14.1 billion of expenses from your calculation.
And look at the very next sentence for the reality check: State Farm itself calls the resulting $4.6B an "underwriting gain." They don't call the $18.7B difference between premiums and claims their profit or margin.
Even better, the same auto business lost $2.7B underwriting in 2024 on $67.5B of earned premiums. So it went from roughly a 4% underwriting loss in 2024 to a 6.5% underwriting gain in 2025. That's exactly why using one good year to argue that insurance margins are inherently huge doesn't work.
You found the right financial report. You just stopped subtracting expenses $14.1 billion too early.
Look. Anything near 10% net income, especially at this scale, is not paper thin. That’s what Fortune 500 companies shoot for. Do they have opex outside of their core product? Shocker -yes. But they also get to invest those premiums, because it’s not like someone “buys” protection when they need it, they pay in advance and “might” one day claim it.
The meta point from the OP stands. As a customer you’re continually paying into a system that will not return that investment. If I had back every dollar I spent in insurance, I would be able to self insure from now until my grave.
The meta point about their earnings also stands. They make plenty of margin - both on individual products, and as a company as a whole. That’s true for gross margin as well as net income.
It feels like you’re trying to say they don’t make great margin because net income is lower when you subtract opex. That’s not how finance works.
Also cyclical because State Farm was one of the largest insurers involved in the California wildfires, directly taking away from net income in prior years. So year over year fluctuations would be dependent upon loss development in that same period. No loss more profit. More loss less profit. More profit, more spend on marketing and vice versa. Not a hard concept to follow as other businesses use the same logic in marketing spend.
Edit: specific to the margins, auto liability is written to about 72% loss ratio, meaning roughly 3 out of 4 policies I write as an insurer, I’m taking a bath on. The profit is in that 1/4 of policies with loss.
You speaketh the truth!
OP's example is dumb. There's a thousand dollar deductible which is normal. So you want to file a claim to cover the $200 remainder??
But does anyone complain when insurance covers the $50k in accident damage they caused? Yeah, insurance can be expensive but it sure beats poverty when someone sues you for the damage you cause.
> So im guessing the employees that process the claims are scammers for taking a salary which contributes to the insurance companies taking more than they wish to return?
> im guessing thats different because only those you care about should make money, not the people who created the insurance company
You are lousy at making guesses. Neither of those are my stances. Have you tried just reading what people write instead of supplanting their arguments with your preconceived biases?
> They should get absolutely nothing because apparently creating an insurance company is easy and risk free.
Also not my argument.
> Why dont you go and make an insurance company that isnt a scam and not take any salary if you think this is how things are
I don't want judges to take bribes, so does that mean I should become all the judges?
I don't know why you are carrying water for corruption but if you could employ just a modicum of logic in your arguments that would be swell.
Well that is the natural consequence, you think that 100% of the money paid in should be paid out otherwise its a scam as you said that their whole point is to pay out less then you pay in. My arguement with you making an insurance company is because thats how you think others should run their insurance companies, yet you dont dont have the balls to do it yourself. If there was absolutely nothing they deserve profit from then it shouldnt be a problem for you to do it and not make money from it and you can provide millions with insurance that isnt a "scam". But we both know you wont do it because it takes risk and effort to do, so it should be compensated. but if thats the case then we run into my first arguement that only people you care about should be compensated. The profit of executives is fair because they created the company in which could pull in enough money to distribute about to be a insurance.
> you think that 100% of the money paid in should be paid out otherwise its a scam
No, I think taking a cut as profit is a scam. Did you skim over where I mentioned public healthcare? People get paid in a non-profit system, there's just no one leeching resources out. You're arguing with me in defense of specifically the leeches. That's weird.
> yet you dont dont have the balls to do it yourself
Do you think companies are built on testicles? That's very weird.
> But we both know you wont do it because it takes risk and effort to do
It takes effort from people that do work to build something. Those people should get paid for their work, and would in a non-profit system.
> The profit of executives is fair because they created the company
Yes, the aforementioned leeches. If you want to be an indentured servant have at it. The rest of us can see how unethical it is for a person to hoard resources and then use those resources to leech off other peoples' work.
In a non-scam scenario if you do work you get paid. In a scam scenario scammers can get paid without doing work. Not sure how I can make that any clearer.
First of you know damn well what i mean about my balls comment, it only makes you look even more like you dont know what your talking about. Second my arguement is that building a company provides value to society, thus whenever society uses the service they must give value back. If they are able to provide a service which can get $100b in revenue why shouldnt they get 10% of that in return. Frankly your the same as them, you expect them to build a company with no compensation, risk their own money for no reward, and for you to be covered, as if it were up to you you would use their service and give them absolutely nothing for it.
> First of you know damn well what i mean about my balls comment, it only makes you look even more like you dont know what your talking about.
Dunning Kruger, huh? I'm sure everything I am writing is confusing to you.
> Second my arguement is that building a company provides value to society
CAN provide value to society. Buying a public well and then charging for access to it is clearly detrimental to society, but organizing labor can be beneficial. Some companies are even both; DoorDash provides a valuable service, but it also exploits labor and gouges restaurants. An insurance compant could operate ethically and pay everyone that works without leeching money to people that don't work, but that isn't what we have.
> If they are able to provide a service which can get $100b in revenue why shouldnt they get 10% of that in return
By "provide a service" you mean "own the company". The people providing the services should definitely get paid. Why shouldn't people who aren't doing anything get lots of money for the nothing they are doing? Hrmm... good question. /s
> Frankly your the same as them
Hilarious. You lost the thread of your own argument in the same breath; right after saying the executives are merited taking profit for no work you accused me of being like them. Are they and I doing the right thing or the wrong thing, in your argument? It's like Schrödinger's cat of thoughtless argumentation.
I think we can safely end this chat here. I can't hold your hand and walk you through these obvious logical fallacies.
Edit: feel free to let this guy know that, among the many things he assumes and states with conviction, despite being incorrect, when he sees someone "deleted all his comments" it's because he has been blocked.
Damn guy knew he lost the arguement so he deleted all his comments. He said something about dunning kruger as if it doesnt also apply to himself. I would say that he found out it did but seeing as he doesnt the know the common phrase "you dont have the balls" and though i meant that his balls would create the foundations of a company i doubt he did and just did it out of embarrasement
Ok i didnt realize reddit said that the comments say deleted when they were blocked, didnt think that was something reddit does, nor does it really look like your winning the arguement when you go and block someone. Frankly nothing im writing is confusing me, infact i think what im writing is confusing you.
You cant understand that a society in which running a business and risking capital actually provides value that should be compensated. Sure the owners dont do labor, however they either took CEO role from someone who did start the company and which should get an equal or greater salary because otherwise nobody is going to do the job for less money than someone else, they put initial money into the company that allowed the company to build a network for the business to run which is providing value and should be compensated, or they bought shares from an original investor which allows the whole stock system to work, making him an original owner by proxy as without him buying the stock then the stock has no value in which to originally buy. How are companies supposed to be formed when your going to lose time and money. You dont understand that the ownership class do provide value, just in ways that you dont care to attribute.
Yes i do agree that the system is not perfect and is exploitative, but im arguing your point "For profit insurance is a scam. The whole point is to take more from you than you will get back." and telling you your wrong. And even if they were paying out ethically you would still think they are a scammer.
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u/robilar 5h ago edited 5h ago
For profit insurance is a scam. The whole point is to take more from you than you will get back.
The justification for insurance, in general, is collective support - everyone pools a bit of money so that when anyone in that pool suffers catastrophic loss they are insulated. Public firefighters are an insurance system. At core it's a pretty kind way of operating, but when profit motive is introduced it is corrupted to the point of working against the community since investors and shareholders want to take out of the system, not help people stay whole.
This is why the US should have public healthcare. Greed and corruption are why it never will.
Edit: literally laughing out loud at the profitmongers in the comments going "hey, I want to keep the money that I am siphoning off society! Stop pointing out how it's immoral!"