Originally Posted by
r ward
as policy numbers rise, the likelihood of claims rise. as the likelihood of claims rise, premiums increase because of the likelihood of loss. insurance companies don't like losses, they are not in business to pay losses, they are in business to invest premiums in profitable investments. paying losses decreases their potential to make a profit. increasing premiums hedges that that loss potential. anybody who really knows anything the about the insurance industry, knows that they are not in business to pay claims who's likelihood increases with increasing policy numbers. ask anyone who lives in a state that has mandatory auto insurance laws if their premiums actually went down after the law was enacted.
Actually, Jester is right on this one. More policies means lower rates. That said, get into an car accident and see how much the insurance company tries to low ball you. The insurance companies make their money by paying as little as they can per claim so that their books always show a profit when balanced against the premiums they charge for a policy. Just like anything else, if the insurance company can find a way to not cover a claim, they won't pay it and will come up with a way to justify rejecting said claim.
For the record, I do live in a state with mandatory auto insurance laws and saw no change in rates when that law became active. Just because having auto insurance became mandatory didn't mean anyone that didn't have it went out and got it. It just meant that they do everything they can to not get caught. If everyone had insurance, all the insurance companies would drop the "uninsured motorist" coverage since it wouldn't be needed any more