Do auto insurers profit from surcharges?

Answer 1

No, Not really, Surcharges are charged to cover losses that are primarily incurred only by those types of vehicles or drivers who incur the surcharge. For example, Custom rims on your pimped out truck will likely result in surcharge because those rims are most often stolen and much more likely to incur a claim after the rims are stolen. A driver with numerous accidents on their record will be heftily surcharged due to points because they are more likely to have an accident in the future than someone who has never had an accident. A driver with numerous speeding violations will be surcharged because there is a much higher likelyhood that will have an accident while speeding. Since policies with surcharges usually have a higher number of claims and therfore higher loss ratios, the insurer is not profiting at all, in fact they are making less profit on policies with surcharge assessments than they do for those without surcharges. They are only trying to avoid having to increase premiums on good drivers in order to cover claims on bad drivers.