Here is a myth. The cheapest way of buying insurance is via one of the major price comparison sites; after all everything is computerised, so there are no middleman charges, right? Wrong. That premium you pay passes through many hands before it reaches the underwriter (in other words the actual insurer). So, what really happens to it?
Nearly every car insurance premium attacts an extra 12% tax. The only exceptions are policies taken out by disabled drivers who take advantage of the Motability scheme; for them the tax rate is zero. However, on the other hand, if you buy your insurance from a car dealer at the same time as a new car it can rise to 20%!
The major price comparison sites get a lot of their sales via search engines. Every click on a search engine advertisement for car insurance costs several pounds, and very many clicks are necessary before a policy is purchased. The majority of insurance providers simply cannot afford to buy search engine clicks regularly because they just aren't economic.
Having factored in their search engine costs plus other advertising expenses (those never ending TV and radio ads cost a fortune) plus their other overheads plus a reasonable profit, the major price comparison sites charge a fee or commission to the companies (mainly brokers) that provide the quotes.
Most of the companies that offer policies via price comparison sites are not actually insurance companies; they are brokers who package policies under their own brand names. They do, of course, take a commission for this.
These are the people that actually pay out if things go wrong!
Very few underwriters actually make a profit on premiums; in fact they often have to pay out more than they receive. They usually do make money, though, on selling addons (courtesy cars, personal injury cover, legal assistance etc); fees for policy changes, for instance when customers change their car or move house; and finance charges to motorists that pay monthly rather than yearly.