Why do insurance companies makes loads of money

[Takwa]

because they decline most of their claims!!!!!

 

[GreyWing]

When I worded for direct line / UKI insurance the top guy says they payout 98% of what they take in on policies.

Norwich Union payout around 104%

So it looks like they make their money on the extra products rather than their policies, stuff like installments, no claims protection and breakdown insurance.

Complicated business that stuff

 

[retired_member32]

i love direct line i had my car nicked many years ago and rang direct line up saying that i had by car stolen from my local gym and i had a cheque in the post two days later ,no assessor and twice as much as i insured it for

reeeesult

 

[jasman]

Actually, the business model is generally that they pay out roughly what they receive in premiums (usually a bit less), but because there is a time lag from receipt of premium until payout, they effectively are companies holding huge cash reserves which are invested or lent to banks etc. Hence the insurance company earns substantial sums of money from interest and investment returns on its customers' money. Imagine if you took £1billion in premiums, held onto the money for a year, then paid it all back. If you could get a 5% return, that's £50 million. A simplistic example, but one which illustrates the point.