The net profitability of the insurance industry to 2017 fluctuated between 3 and 10.5%. Life insurance had the widest range between quarters, from 3% to 9.6%; insurance of property and responsibility became 3% to 8%; and health insurance in a narrow range from 4% to 5.25%. Net margin for insurance brokerage companies in 2017 was higher than that of the insurance industry in General, by 9.27% to 10.5%.
Private insurance companies also experienced a number of net profit for 2017:
Like all other companies in the insurance sector to incur expenses and to sell products, and they need to find the best balance between operating costs and market prices. Costs for companies in the insurance business include the money the insurer pays to the service provider. For health insurers, it will pay hospitals or doctors. In the case of automobile insurance, including payments made in repairs or medical expenses if you were involved in injuries.
Changes in the cost of services provided, pricing changes and the number of received claims all the factors that may cause net profit margin of the insurance companies vary from year to year. For the purposes of long-term valuation of companies in the insurance business, according to analysts, in annual terms, the net margin data is the most useful information.
Calculation of net profit is mainly significant for companies in the insurance sector, because the values are so low. Many insurance firms operate on margins as low as 2% to 3%. Smaller profits mean even the smallest changes in the insurance company’s cost structure and pricing could mean a fundamental change in the company’s ability to generate profit and to remain solvent. (For associated reading, see: what is the formula to calculate profit?)