General insurance How Insurance Companies Make Money?

[kayode10]

At first if my question sounds dump, you need to forgive me because I know little about insurance.

This is the question I have been keeping to myself for a long period of time.

Perhaps I have been looking for someone to explain it to me better. I want to know how these insurance companies are making money.

Take for instance, someone just register for car insurance in an insurance company. The owner lost the car to fire after six months.

If you look at it very well, the premium paid by the client is not up to the new car the insurance company are going to give him as a replacement. This is a loss to an insurance company in my own perspective.

So I want to ask those of you who have knowledge about insurance to tell me how all those insurance companies are making money and able to pay salaries for their workers?

 

[Wisdom01]

The insurance company also receives premium from the person insuring , it's a way they make their gains and also shareholders investment too , if you insure your car against any form of risk for 1 year and it got spoilt on the 6th month due to fire , they would give you another car but you must complete your premiums payment for that year

 

[Mandy96]

To my knowledge I think insurance companies make simply by investing the income they make from the premiums they receive from the insured clients. Insurance business is not a business to make money within months because it takes time to yield profits. This is why insurance business is not really done in a place like Nigeria

 

[Jamoflondon]

It is obvious to everyone that the insurance company makes money mainly by the premium income they make from their clients. Imagine an insurance company that has so many clients and these clients pay their insurance premium pay as agreed. They will use this money to invest and make money from it themselves

 

[Alexandoy]

Insurance companies have a formula based on the actuarial studies. That is for the life and health insurance. For the fire insurance they have a capital to handle the claims. After 1 year with no claims then the insurance company have earned enough from the premium that will handle the coverage in case a fire will occur and a claims will be filed.

 

[KingDaniel]

The concept that drives the insurance company revenue model is a business arrangement with an individual, company or organization where the insurer promises to pay a specific amount of money for a specific asset loss by the insured, usually by damage, illness, or in the case of life insurance, death.

In return, the insurance company is paid regular (usually monthly) payments from its customer, for an insurance policy that covers life, home, auto, travel, business, and valuables, among other assets.

 

[Mika]

I will answer your example. Insurance companies do not insure just one car they insure hundreds of thousands of cars and not all cars will have accidents and not only policies need to be paid off. Furthermore, the insurance companies invest in the share market and other businesses to earn profits.

 

[Chibson]

Definitely not everything people insure will cost the insurance company at the end of everything because there are people that ensure their properties and at the end of the day nothing will happen to such properties. so insurance company definitely makes money from the premium packages people purchase or insure.

 

[Phabbyfundz]

LOL , i must say your question doesn't dump because I have been pondering on this same matter for a while, I would often ask that if the amount you paid are not even worth the price of the property,business or even company you are insuring with an insurance company them how do this insurance companies make their profits.