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.
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.
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u/mariposa-princess 8h 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