Insurer’s Business Model

Insurers make money in two ways. Through underwriting, the process through which insurers select what risks to insure and decide how much premium to charge for accepting those risks and by investing the premiums they have collected from insureds.

The Bush Legacy: Number in Chicago without health insurance hits 22.7%

The number of people in Illinois without health insurance is up for the
second year in a row, to 15.9 percent, says a new report by researchers
at the University of Illinois at Chicago.

In Chicago, the proportion is much higher, 22.7 percent. In the
metropolitan area, it's 12.8 percent.

"You walk into a doctor's office, and they say you need a 45-minute
procedure and it will set you back $40,000," one Chicago man told the
Gilead Outreach and Referral Center, which commissioned the study.

Principles of insurance

From the point of view of the insurance company there are four general criteria for deciding whether to insure events or not. 1. there must be a larger number of similar objects so the financial outcome of insuring the pool of exposures is predictable. Therefore they can calculate a "fair" premium. 2. the losses have to be accidental and unintentional from the point of view of the insured. 3. the losses must be measurable, identifiable in location, time, and be definite. They also want the losses to cause economic hardship. That is, so the insured has an incentive to protect and preserve the property to minimize the probabilty that the losses occur. 4. the loss potential to the insurer must be non-catastrophic. It cannot put the insurance company in financial jeopardy.