As a long time stock holder of Berkshire Hathaway(Warren Buffett), which is largely an insurance holding company, among other things, I read about the insurance business in the annual report. By and large, insurance by itself is not a profitable business, the goal is actually the cash flow it generates. i.e., the premium collected today will enventirally be paid out in claims, but before that money is evitablly gone, insurance companies make money on that money. Since we are talking about billions and billions, the gain is substantial.
It is correct to say it is a numbers game, they must calculate the risk based on available data. Premium from everyone covers the claims from few. For a new model, the data is limited, except the basic known facts, such as HP, weight, categories, etc. As years go by, more data is known, such as high thieft rate, rollover claims, high damage cost, etc. I have no idea if Hummer's offroad damage rate is higher or less than other SUVs, except what I read here. Such data will logically flow into the data bank, which all insurance companies share, that eventually form the basis for future premium calculation.
Since insurance companies share data and DMV keeps record insurance can check at will. If one makes damage claims then switch insurance carrier, as someone above suggested, the claim record will follow that driver/owner.
We may think insurance companies are evil, I certainly think that way sometimes, but Peter(San Diego) rolled his brand new H2 a year ago, got a brand new H2. Many others on this forum had thousands $ in each claim. Where did the claim payments come from? from everyone who has not made a claim. That score must be settled sooner than later.
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