What factors contribute to good profit and loss in an insurance company biz?

Question

What factors contribute to good profit and loss in an insurance company biz?

Answer 1

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Answer 2

1.  GOOD UNDERWRITING

2.  good retention

3.  low employee turnover

4.  using "Best's Practices"

Answer 3

An insurance company's profit or loss is dependent upon two main factors.

First is rate adequacy. That means you have to be able to write insurance at a rate that is high enough to cover administration and payment of losses. Rate adequacy may sometimes be difficult to achieve due to competitors in the market driving down average premiums on issued policies. Rate adequacy may also be hampered by State regulatory bodies limiting necessary rate increases.

The second major factor is risk selection. If you are an auto insurance company you need to be able to select the best drivers. Those would be drivers who have few or no tickets or accidents. A relatively new risk selection factor is credit scoring where you determine the lowest risk drivers by the quality of their credit standing.

If you are able to charge a fair premium based upon the risk assumed your insurance company will be profitable.