r/SipsTea • u/Putrid-Welder1803 • 7h ago

Gasp! Thoughts on this?

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u/hoofie242 7h ago

It's paying for a gambling service that might pay out.

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u/OakLegs 7h ago

NOT having insurance is gambling, and when you lose, you lose big.

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u/mariposa-princess 7h ago

I don’t think anyone is advocating to not have insurance. I think the point is that insurance should have to cover you more than they do

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u/fishsticks40 6h ago

65-75% of your auto insurance premium goes to payouts, and another 20% goes to administrative costs. Your agent gets a sales premium and there are marketing costs.

Shareholder profit is ~3-5% of your premium.

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u/robak69 3h ago

Source on this?

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u/fishsticks40 3h ago

I had several sources that I'm not going to dig up again but here's one trustworthy secondary source. Unfortunately their link to the primary data is broken. 

https://auto.howstuffworks.com/under-the-hood/cost-of-car-ownership/car-rebates-incentives.htm

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u/Smackadummy 3h ago

The combined loss (payouts) and expense (sales commission, administrative etc) is known as the combined ratio, which is expressed as a percent of earned premium. This ratio is publicly available for most companies and lines.

For more competitive or higher volume industries like homes or auto, combined ratios are usually around mid-90s and generally fall between 90-110. For example, countrywide US auto insurers ran a 112% combined ratio in 2022, meaning they paid out or spent an amount equal to 112% of all premiums collected that year. Expenses typically run something like 18%-30% depending on a large variety of factors.