Insurance carriers need a loss ratio below 60% to stay profitable, since operating costs eat 40-50% of premiums. One market operated at 56% loss ratio with a 4% profit margin on $300 million in business, thin but enough to survive.
So most carriers work off of what's called, right, a loss ratio, which is pretty much a way to dictate, hey, how much are we paying out in claims versus what premium we collect? Carriers usually will tap out or not make money at a 60% loss ratio or higher, generally because their fixed costs of running an insurance company ranges between 40 to 50%. And then if you add, right, some investment income, you have some additional margin on top of the 100% of premium collected. The carriers we were working with were running at a loss ratio about 56%. So they were profitable, but they just weren't profitable enough. They weren't making enough money to stay in the business.
So they're kind of right on the edge once you factor in all the overhead and everything else.
Yeah. But if you take that, right, 4% profit margin on $300 million, I mean, it's a significant amount of money when you divvy it up amongst the individuals themselves who are paying for it, right? It might not be to an insurance company who's insuring trillions of dollars globally, but for that specific market, it's still decent, decent enough amount of money where, hey, it, it's still enough room, right, where we're making money. It's still profitable and it can carry on and self-sustain itself, if you will.
