In the previous post I made the claim that the Percentage of Premiums Returned (PPR) is the one number that all insurance companies should give us, so that we have a better idea of what we are buying. I also made the unsubstantiated claim that the PPR is shockingly low, despite a wealth of web sites (strangely affiliated with the insurance industry) claiming that the cost of payout frequently exceeds premiums. Who’s right?
Well, since many insurance companies are publicly traded, it’s easy enough to figure out. You just have to go to the company web sites and look for the financials. I felt like I really should do that, and picked the first insurance company that sounded big enough and well-known enough. Methodology: I searched of the largest insurance companies in the U.S. and got this list. There, I looked up the first insurance company that would insure things like autos and condos, since that’s a better comparison than life insurance (which has an investment element to it.) The biggest one was State Farm, which I happen to know from their extensive advertising.
I then searched for the company financials, as disclosed, and got this link. Now, I stress that I chose State Farm simply because it was the first one on the list. I do not think it is particularly good or bad as an insurance company, and the numbers are probably just typical of any insurer. So please no State Farm bashing!