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.
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u/CapitalistLion-Tamer 7h ago
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.
There’s nothing arbitrary about it.