other service providers for lower rates than the individual would be able to get, thus increasing the benefit to

consumers of becoming insured and saving the insurance company itself money when it pays out claims.

Insurance companies receive income, as Figure 16.2 shows, from insurance premiums and investment

income. The companies derive income from investing the funds that insurance companies received in the past

but did not pay out as insurance claims in prior years. The insurance company receives a rate of return from

investing these funds or reserves. The companies typically invest in fairly safe, liquid (easy to convert into
cash) investments, as the insurance companies need to be able to readily access these funds when a major

disaster strikes.

FIGURE 16.2 An Insurance Company: What Comes In, What Goes Out Money flows into an insurance company

through premiums and investments and out through the payment of claims and operating expenses.

Government and Social Insurance
{"batch_upload": true, "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "creator": "PDFMiner", "uploaded_via": "batch_uploader", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "file_size_mb": 26.99, "total_pages": 597, "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creationdate": "2022-12-07T14:15:44-06:00"}