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Where Does the Auto Premium Go?

Insurance companies basically do three things with the premiums collected.  They:

 

  1. pool the money to pay claims; 

  2. pay for expenses involved in selling and providing insurance protection; and  

  3. invest the money.  Investment earnings help keep down the cost of insurance for policyholders.

Auto insurance in Michigan is not a profitable market.In 2013, auto insurance companies paid out $1.15 for claims for every $1.00 collected in premiums.  

 

How do they stay in business?

 

Proceeds from invested funds in capital and surplus accounts, along with money set aside for reserves, enable insurance companies to continue insurance operations when losses exceed the amount collected from premiums.

 

 

Savings tip:

 Maintain good credit. Most insurance companies use information in your credit history to price auto insurance policies.Research shows conclusively that people who effectively manage their credit make fewer claims. To be sure you’re getting the best credit you deserve, it’s a good idea to check your credit record on a regular basis to be sure all information is accurate.

Posted 9:31 AM

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