A:

The average return on revenues for the insurance industry, which is part of the broader financial service sector, is approximately 8.5%, slightly above the current overall market average of 7.8%. Profitability is generally consistent across the three main segments of the insurance industry: life insurance, property and casualty insurance, and health insurance.

Return on revenues is simply an alternate way of stating net profit margin, the percentage of total revenues that remains for a company after subtracting all costs and expenses, including taxes and interest. This basic profitability metric is important for evaluating and comparing insurance firms.

Life insurance allots monetary benefits to a decedent's family or to another designated beneficiary. Life insurance policies pay benefits in lump sums of cash or an annuities. Annuities offer a stream of regular payments over an extended period of time.

Property and casualty insurance are broad terms used to cover many subtypes of insurance. Casualty insurance protects against accidents that are not necessarily linked to any specific property. Auto insurance, some liability insurances and workers compensation all fall under casualty insurance. Property insurance offers protection against risks to property, including weather, fire damage or theft. Specialized types of insurance, such as earthquake insurance or flood insurance, fall under the broader category of property insurance.

Health insurance covers costs associated with medical treatments. Dental insurance is often grouped with health insurance; however, it is most commonly sold as a separate policy rather than as part of a health insurance policy. For many people, health insurance is part of the benefits that they receive from their employers.

Insurance companies generate revenue from insurance policy premiums, but a substantial amount of additional income can be gleaned from investments made with premium payments.

Another source of revenue for insurance companies is derived from the float. A float is the money on hand that results from the influx of premium payments sooner than the outlays for insurance claims covered by the premiums. When interest rates are especially high, an insurer's float can be a significant source of revenue.

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