Car Insurance Basics

Why Insurance Companies Love Group Motor Insurance


March 10, 2015

Auto Insurance companies are very shrewd in their business. They have optimized a wide range of business models, which make it possible for them to make huge profits. One of these models is the group auto insurance. This article discusses various reasons why auto insurance companies love group motor insurance schemes.

Marketing is Easy

Correction! Marketing is not easy anywhere, especially in the insurance industry. Competition is very stiff. The point here is that the marketing effort required to win a corporate client does not compare with the marketing effort needed to with the same amount of business from individual buyers. This point alone makes it very profitable for insurance companies to offer insurance services to groups at a lower price, compared to selling policies to individuals.

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Products Development Costs are Low

Over time, car insurance companies have managed to standardize their products based on the demand patterns for corporate clients running group car insurance schemes for their employees. Therefore, the insurance companies have low product development costs because they deal with uniform needs across various organizations. The variation between policies offered by insurance companies for corporate clients with group car insurance schemes is very small.

Cash Flow is Reliable

Group car insurance schemes also give insurance companies reliable cash flow. This means that once a motor insurance company signs a contract with a corporate client, they have assurance that the client will pay the premiums. Business consultants will tell you that businesses collapse because of cash flow constraints, and not because of profitability. A company can survive for many years if it has the funds to pay meet its financial obligations even if it is operating at a loss. Insurance companies value corporate clients because of the predictable cash flow. 

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Claims are Predictable

One of the interesting characteristics of group dynamics is that it is possible to predict the behavior of groups to a large extent, based on data from similar groups. In this context, an insurance company can predict how much it will spend on claims from a corporate client based on data from other group motor insurance schemes. Corporate clients tend to have similar group dynamics that serve as predictor for their risk levels. The business of insurance is about the balance between risk and probability. If an insurance company can predict with near certainty the degree of risk in a given situation, then it can offer very competitive prices for its products. Corporate clients offer such certainty.

Business Costs Are Low

Finally, bulk management of payments, claims, and marketing lowers the overall cost of business. Where all staff members have similar policies, the premium calculation models are standardized, further reducing the cost of business. In short, group auto insurance covers give insurance companies a degree of certainty over their business risks. This makes it easy and cheaper to run their business.

Now you know why insurance companies want your corporate group motor insurance business. Use this information to your advantage.

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