Question

How do insurance companies make money?

If insurance companies are paying claims then how to they stay in business or make money?

Apr 23, 2016 Ithaca, NY

Answer
Neil Richardson

Apr 23, 2016

Auto insurance companies bring in money from new and existing customers and that money goes into a pool to cover claims that may be filed by their customers. These companies determine how much money they need in the pool at any point in time based on the number of customers they have to make sure they are able to cover any claims that arise. They make money if the amount of claims that they paid over the year is less than the amount of money they brought in from their customer base.

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