how do insurance companies make money ? Do international insurance companies only make money from the cash they receive from people through insurance policies , or are there other ways to do this?
Some insurance companies, depending on the year of their activity, can earn money through the premiums they receive from customers.
For example, an Insurance company receives $ 10 million in premiums issued or renewed in one year .
how do insurance companies profit or make money ?
If the insurer pays less than $ 10 million in claims that year, they have made a profit.
But if they pay more than $ 10 million in claims, they will suffer a loss.
That’s why insurance companies invest in stocks, bonds and other accounts.
Proceeds from this investment can be used to pay for claims, commissions and administrative costs and to finance their operations.
2- nothing happens
An insurance company may earn a large amount of cash over the course of a year without having to pay any claims.
At best, in such a situation, he temporarily earns a significant amount of money from the money he has invested.
When the stock market is weak, insurance companies are hit, although it is better to have enough income to meet their claims in advance.
In this case, they raise the insurance rate to compensate for the investment loss or they can pay a very small amount of insurance policy to the customer, but this is if they earn a significant income from the investment, before they have to pay. Be your own demands, be sure.
In addition, cash earnings through dividends are very attractive to people who are unable to manage their money.
So they are willing to cancel their insurance policy and buy a new car or a TV with the money earned!
3-long term convergence
Another way insurance companies can win is long-term coverage.
This happens when the policy expires before the customer dies.
In this case, most people do not apply for an extension of their insurance policy.
In such cases, the insurer has received all the premiums and has not paid anything to the insured.
According to insurance industry experts, only 2 or 3 percent of life insurance is paid by companies, and the rest, either by the insured, are canceled or expired before the insured dies due to inability to pay the premium.
reference : chabokonline.com