| ▲ | MajimasEyepatch 13 hours ago |
| The profit margins on insurance are usually pretty slim. Insurance companies are generally not well differentiated from one another, so they have few avenues to compete other than on price. A state-run insurance plan also has to operate at a profit/surplus or else it will have to be subsidized by the taxpayers. The effect is the same either way. |
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| ▲ | onlypassingthru 10 hours ago | parent [-] |
| Slim from a percentage of total premiums but substantial when looking at the absolute dollar amount of profits. It's all relative to the size of the pie. |
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| ▲ | bruce511 9 hours ago | parent [-] | | The absolute value is only meaningful when compared to the amount of capital invested. Its also only meaningful when measured over a long period which takes good years and bad years into account. | | |
| ▲ | MajimasEyepatch 4 hours ago | parent [-] | | Also, when margins are slim, a major event (like a series of wildfires in one of the biggest cities in the US) can wipe out those profits. A responsible insurer can withstand one bad year. But if those major events start happening with more frequency, then one bad year becomes a series of bad years. Reinsurance premiums for the insurer go up, meaning that taking on risk is more expensive, and they’ll eventually have to decide between raising their own premiums to unsustainable levels or pulling out of risky markets. |
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