How Does An Auto Insurance Company Make Money?

  1. 16470 POINTS
    David Osgood
    Agent, Rural Mutual Insurance Co., Union Grove, WI
    I'm certain that this will not be a complete and thorough answer, but I would say in it's simplest form insurance companies make a profit by receiving more in premium from clients than they payout in expenditures ( claims and other operating expenses). There really isn't any magic behind it just simple economics.
    Answered on May 14, 2013
    flag this answer
  2. 130 POINTS
    Wendi Kratzer
    Agency Principal, Wendi D Kratzer Agency Inc,
    In addition to what David said, they take those premiums and invest them, so they are earning interest on those dollars. The way they make money is, more people don't have claims then do, otherwise they wouldn't be in business. If it looks like they aren't going to make any money, your rates will go up.   
    Answered on May 15, 2013
    flag this answer
    3. Did you find these answers helpful?
    Yes
    No
    Go!

Add Your Answer To This Question

You must be logged in to add your answer.


<< Previous Question
Questions Home
Next Question >>