Ben Gilbert: evaluation

Transcript context

…Especially back then, there was much less regulation about capital requirements for insurance companies, and well, all financial institutions. They really didn't have to keep any cash reserves. I mean, they could do whatever they wanted with the money. Speaking of doing whatever they want with the money, I think what was happening back then is that, as you would imagine in the early days of insurance, you would want your premiums to basically equal the amount of money that you would need to pay out in the future. What happens now is, it's assumed that you can do interesting things to earn money on the float. I didn't know this until doing the research. When you pay for your car insurance, they're actually collecting less in premiums than in total they will owe out to everyone, so you need to do something interesting with the float in order to make it so that the insurance company doesn't go under. I never realized that. I suppose that probably happens with competition where everybody's just lowering and lowering their premiums until they realize, gosh, we effectively can sell our insurance below cost because we can invest the float. Yup, and GEICO's got the additional advantage which it still has to this day of, they don't employ agents. They just have a fundamentally better cost structure than all of their competitors, which means more money they get to play with.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.