What do insurance companies do with the money they collect?

Question

I am wondering what insurance companies do with the money they collect? How do they earn money off of the money they collect? Can they put it in an interest bearing account?

Answer 1

put in their pockets and get sloppy rich and phat. but theres a place for them and its called h**l.

Answer 2

Invest it with institutional investors (401ks,etc) generally.

Answer 3

Barry is quite correct, insurance companies have to have enough funds on hand to pay all their losses now and in the future, which is why reserving a claim is very important.  If an insurance company cannot cover anticipated losses, they can be downgraded, then out of business.  For most insurance companies, they need some sort of investments as the premiums paid may not cover all losses.  Also to pay salaries of employees, and insurance workers are not fat cats sitting back counting money, it can be stressful hard work

Answer 4

Invest it. That is their primary source of revenue. They also put some aside to fund losses.

Answer 5

some is kept in interest bearing accounts for cash on hand the rest is invested in the market

Answer 6

they invest it and when a claim is made they liquidate to pay up

Answer 7

1. Some is kept on hand.Depending on the size of the company,  there are claims being incurred almost every minute.  You remit your premium, a lot gets paid right out in benefits.

2. Some is invested in easily liquidated  interest bearing securities.securities. the money may be needed in the event of a rash of claims, but it isn't needed right now.  It is August, but picture an icy day in December where there are fender benders all over the place.

3. Some is invested in long term investments, such as mortgages, CD's etc, for the disaster claim which may or may not happen. ((hurricane.)

This isn't a decision  made on the spur of the moment. Different states have different requirements which may govern how a company  handles  their cash and investments.