[PLUG-TALK] Re: [PLUG] Laptops and warranties

Michael Rasmussen mikeraz at patch.com
Mon Aug 7 14:01:02 PDT 2006


Paul Heinlein wrote:
> The trick is in how they cover the warranty expenses.
>
> I've heard from fairly reliable sources that of the types of insurance
> carried by most people -- life, health, homeowners, and auto -- only
> auto policies are able to create profits on their own. The others are
> all break-even or losing propositions.
>
> Companies that offer those types of policies are often little more
> than brokerage houses -- using premiums as cash flow to fund their
> investment portfolios.


That actually applies to most large volume or long term insurance lines. 
Catastrophic re-insurance being a good example.  The insurance is sold at and
underwriting loss and the profits for the company are derived from investment
activities on the float.  After all the time lapse between a group of premiums
being paid and the payment of claims from those premiums can be years.

See any of Warren Buffett's Letter to Shareholders for the last few years for more
on this topic.

http://www.berkshirehathaway.com/letters/letters.html

-- 
   Michael Rasmussen, Portland, Ore, USA
  Be Appropriate && Follow Your Curiosity
        http://www.patch.com/words/





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