NEW YORK ( TheStreet) -- The insurance business will always come back after a disaster such as Superstorm Sandy, but the customers are going to get it in the neck. As I noted last week, insurance is a form of bookmaking. Your premium is a bet that something bad will happen. That something is defined by the fine print of your contract. The insurer takes your money, knowing that it's unlikely it will have to pay off. The insurer get to invest the money while the bet is active, and if you "win" - if nothing happens -- then you "lose" -- the insurer keeps the money. When the bet is bad, but must be made, the government steps in. The Federal Emergency Management Agency (FEMA) and Small Business Administration (SBA) have paid out $7.8 billion so far in New York alone, according to the Insurance Journal, $3.7 billion of that in flood insurance claims. Of course, as I noted before, you pay for that. The act that reauthorized the flood insurance program last yearalso authorized some huge premium increases, based on risk. Even when Uncle Sam is your bookie, he doesn't like to lose money, and when the Act was signed, the flood insurance fund was $18 billion underwater. The National Association of Insurance Commissioners publishes an annual list of the Top 25 property and casualty insurance players. Most are focused on car insurance. Note in particular the "Direct Loss & DCC to EP Ratio" -- that's the insurers' losses, plus costs meant to contain the losses and defend themselves in court, compared to the amount of premiums that came in. Total loss ratios range from a high of almost 85%, for an Australian company called QBE that does marine as well as car insurance, to a low of less 47% for Assurant ( AIZ), which also does health insurance and handles extended warranties. What the layman will notice is that everyone's taking in more than they're paying out, sometimes a lot more. What insurers and investors will note is the action, that results can vary widely, that nothing is really certain. You can't buy the largest player in this game. That's because it's State Farm, which is set up as a "mutual insurance" company. That is, it's owned by policyholders instead of stockholders. Based on policy income, State Farm is twice as large as the next largest insurer, Zurich Insurance, with more than 10% of the market.
The biggest plays you can own are Berkshire Hathaway ( BRK.A), which owns GEICO, and AIG ( AIG). Since the former is a conglomerate, your pure play is AIG, or Assurant. Insurers try to protect themselves the same way investors do, by spreading their risk across different lines of business, and different places. In Ernst & Young's 2013 industry outlook, this is recommended. The report also warns insurers against the possibility of new regulations, on both the state and federal level, and recommends they use "big data" sets like vehicle telematics to minimize risk. Ever seen the Progressive commercial where the company offers a gadget you plug into your car to "get rid of rate suckers?" They're collecting telematics. Point is, these boys can take care of themselves. The U.S. property insurance business is worth more than $500 billion in premiums each year, according to the NAIC, with almost 5% of that money devoted to trying to limit losses, enforcing the strict terms of contracts and going to court against customers. It's this knee-jerk response to loss that drives customers crazy, and makes the plaintiff's bar rich. Insurance is a bet you have to make. Whether your bookie is a publicly-traded corporation, a mutual company or your Uncle Sam, it's spreading its bets, and fighting to make sure it stays in the game. Even in the age of Superstorm Sandy. Which, as I noted at the top, means you get it in the neck. At the time of publication, the author owned shares of AIG. Follow @DanaBlankenhor This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.