I am wondering how insurance companies make money. (I know this may seem like a stupid question ) But if say somebody wanted to open his own health insurance / property casualty insurance company. 1)He would first go to town hall or the state to get a small business or corporation paperwork, have a hearing with the board of directories,...etc 2) after approved ... they would some how have to get funding from somewhere,... bank loans, shareholders ,..etc 3) after the money and the business title is issued .... then calculate the risks / math on how much he should sell insurance at for each thing he is insuring (based on age , height ,weight ,...other factors ),....etc 4) after all that you got to make sure you have enough customers to keep your business running.... marketing/advertise his business (in the hope to get enough customers) With all this it seems that numbers 3 and 4 would be the most problem / risk areas. Since How do they know they will get enough customers and how can they know for sure that their won't be a major problem where the bulk of their customers actually having to use their insurance faster then the customers paying the company income/profits? Seems to me their is alot of risk involved. In theory you can work out the math so that you know you at least need X many customers paying Y amounts of dollars per year to keep the business running (i.e rental costs per month, utilities , employees payments/salaries , and some profit ) But I can see away to guarantee even with the math supporting you that it will work out. Also if it didn't work out I would be worried about who I owed the money to bank loan , or shareholders,...etc (they would probably want to kill me) Maybe somebody that knows more about how to start an insurance company works could elaborate. And give me pointers if my business sinks what to do about the owed money how to take care of the damage in the most ethical or best way possible in the event you cann't pay it back.