It probably seems like you pay a lot of money for your business insurance. You might be wondering where your hard earned dollars are going when you pay your insurance every month or year... Our industry could do a better job of explaining what typically happens to the average insurance dollar you pay. This entry will attempt to explain just that.
45 cents of each dollar goes to pay claims. This could be a minor auto accident or a major fire. A large portion of business insurance claims include business interruption coverage. Most business package policies will include some loss of business income due to a covered loss. When you factor all these exposures 45 cents per dollar paid can go pretty quick.
20 cents goes to the administration of your policy. This is for underwriting, processing, claims administration, customer service, etc. This pays everyone from the CEO to the call center receptionist. Insurance companies insure millions of people countrywide and help our economy. Though it can be expensive to administer insurance carriers have utilized technology and experience to get this cost down as much as possible without sacrificing service to their agents and customers.
15 cents goes to your insurance agency or brokerage in the form of commission and or profit sharing for selling and servicing your account. An average of 4.5 cents of the 15 goes to your actual insurance agent who sold the coverage, the rest goes to the agency for operating expenses.
10 cents goes back to local, state and federal taxes and legislative support. Every state has their own regulations and department of insurance. It takes a lot of money and support from insurance carriers to work with these regulators.
10 cents goes to profit which goes to shareholders and stakeholders of the insurance company. Most major insurance carriers are publicly traded and re expected to return a profit to their shareholders.
There you have it! This is a very basic overview of where your average premium dollar goes. Not that it makes it more enjoyable to cut those checks every month, but we wanted to provide some insight so that you can appreciate your insurance costs a bit more which may make the process of paying a little less painful.