Where does the Insurance money go?

Question

Honestly, does the money go to anything else other than, the Insurance Co.'s employees and whatever policy that they cover? I mean, they're taking your money to pay for replacing car parts in an auto accident, to the orthodontist for a crown or cleaning, etc. and the hospital for the surgery, check-up, etc. but after that, where does the rest of the money go?....

Answer 1

The agent gets a good chunk. Never known an agent that makes less than I do, and I'm the one paying him/her.

I had a policy with an agent. Cost around $650. Called a non-agent company, cost $339. And when something did happen, the non-agent company was better to me.

If it is a publicly held company you might be able to get a copy of financial statements. But there are a lot of umbrella words that are used to describe things they put in groups, but don't mean much themselves. Administrative costs could be pens and pencils, employees, or the big raise higher ups give each other.  One person's salary could be a large percentage of the whole amount.

Since insurance is for "in case", just because you don't use it, doesn't mean someone else isn't. You may pay $3600 a year on health insurance, and only use $500 worth, but someone else who also bought the policy could have a daughter that has a disease that is costing them $100,000 a year.  Some insurances only work this way, a pot that is paid into, and used as doctor bills come in. But these are usually small companies, and they often run out of funds.

Answer 2

I really liked mbrcatz1...'s answer because it was quite specific. I would add these general comments.   The agent usually gets 10 to 15% for a commission.  That is adequate if he does his job.  He or she should explain the coverages and exclusions in the policy to you. He should be contacting you to let you know if your coverages are adequate or not and find out if there have been any changes recently.  She should be your advocate if you have a claim.  Many don't do those things.  

Next, a lot of people don't understand that thousands of insurance companies go bankrupt during difficult economic times: It isn't all gravy and easy money for them all the time. Also, they are regulated by insurance commissioners, and if you think they have done anything unfair and you can't work it out with the company you may get help from the commissioners office.

Property/Casualty companies take a big risk when they write policies and that is why they stand to make or loose money in any given year.. For those who believe the odds are in their favor I have a great suggestion: Buy their stock!

Having said that, I know many people have problems with the medical insurance industry and it could be improved in many ways or replaced with national health care. CEO's and officers high in large companies make an obscene amount of money while the file clerks and secretaries make much too little. That's just all my opinion after working in insurance for 31 years.

Answer 3

Be honest,It is gonna take some time to find the answer for your question.Try to have a look the resource here for reference.http://car-insurance.online-helpers.info...

Answer 4

OK, first of all, let's look at the numbers.

A profitable auto carrier, pays out about $1.07 (in claims) for every $1 in premium it takes in.  A profitable homeowners carrier, pays out about $.90 for every $1 they take in, and a profitable health insurance company pays out about $.99 for every $1 they take in.

Administrative costs run about $.20 for every $1 in premium (compared to $.80 for government run programs).  

So clearly, they aren't making their money off the premiums - as the claims make them run in the negative.

Where they actually make their money, are the reserves.  In order to even sell insurance, they must have set aside millions or hundreds of  millions, to pay future claims.  They invest these monies, and ACTUALLY make their profits off of their investments - it subsidizes the premiums, to pay claims and overhead.

Like any other company, the profits go to the owners.  For publically traded insurance companies, that means the stockholders.

But just to put it in perspective, Exxon makes about 4X the profits (averaged over 10 years) that the insurance industry makes, Coca Cola makes about 10X the profit, and Philip Morris about 25X.  

In other words, insurance isn't as "profitable" as "people" say.  When in doubt, look up the balance sheets.  They're public record, at www.sec.gov.  Me, personally, I don't own any insurance company stock - it's not profitable enough for my tastes.

Answer 5

Goes into their pockets. Most aren't non-profit.  Those that are, sometimes they'll send you a check.