[Evan]

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when an insurance company takes money from you it doesn't hold on to it

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If this were true there either wouldn't be insurance companies or you'd pay A LOT more for premiums.

Here's a passage from Buffett's letter that I liked. I think this explains it well:
The source of our insurance funds is “float,” which is money that doesn’t belong to us but that we
temporarily hold. Most of our float arises because (1) premiums are paid upfront though the service we
provide – insurance protection – is delivered over a period that usually covers a year and; (2) loss events
that occur today do not always result in our immediately paying claims, because it sometimes takes many
years for losses to be reported (asbestos losses would be an example), negotiated and settled. The $20
million of float that came with our 1967 purchase has now increased – both by way of internal growth and
acquisitions – to $46.1 billion.


The more cash they have from premiums you pay the more float they have. You have to consider time value of money. Paying out $100 in 20 years is NOT the same as paying out $100 today.

EDIT: Maybe an easier way to think of this is osmething more familiar. It's pretty much the same as deferring taxes. Even though you pay the same amount of tax you pay it later and you gain. The insurers gain the most when they can defer their payments as long as possible. This is why dealing with insurance companies is a huge pain in the ass. They value holding the cash, even if it's not theirs.