Why do insurers need largest contract fee figures in Professional Indemnity Insurance?

Answer 1

These fees are the result of Regulatory structures, Unlike most insdustries, The insurance Industry has rigorous limits on what actual and projected operating and capital expenses may be considered when determining premium rate structures. Every rate change or adjustment is sucject to a government approval process. Obtaining approval for rate changes is not a small affair, especially if your having to do it often in order to compensate for small fluctations in a labor market or other operating expense. Fees can be decreased or increased at any time without a government rate approval to compensate for operational expenses. In Addition, all funds received listed as premium payments are required to go into trust holding accounts to pay out future claims, These funds are not available to the company for daily operating expenses. Profits. if any, from these trusts accounts can only be realized according to the regulations set forth by each state. The Insurance Industry as a whole is one of the most regulated industries on the planet. As a result of regulatory structures as described above. it is not feesable to attempt to incorporate every conceivable projected expense into the underlying rate structure. Fees are resultingly high, When Insurance companies lose money sometimes for several years due to big losses on premium claims, the fees may be the only actual profit the insurance company got.