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This would be true if there were a reasonable amount of market understanding by customers and the friction to switching were low. Neither are the case. Most of

This would be true if there were a reasonable amount of market understanding by customers and the friction to switching were low. Neither are the case. Most of the time, it takes a qualifying life event or open enrollment (once a year) to switch. And then, understanding the trade offs between plans, which are difficult to understand on a good day, is another barrier.

lotsofpulp 4y ago
Then why are insurance company profit margins so low? Why wouldn’t they just jack up premiums irrelevant to their competitors and ignore negotiating pricing and see increasing margins? Low profit margins/multiple sellers indicates a highly competitive field, which means the businesses must be doing something stay in business.
- jjoonathan 4y ago
  Yeah, but "something" could be advertising, kickbacks, cherry picking, lemon dropping, making comparison difficult, selectively optimizing visible metrics while balancing with dirtbag fine print, etc etc. Competition != Productive Competition
  - lotsofpulp 4y ago
    Then the competition who does not do that crap would offer lower premiums and steal business. Just like any other business that wasted money cannot compete with a business that does not waste money.
    - 31835843 4y ago
      And this is only true in a markets that are easy to enter. Starting an insurance company isn’t easy. Why are profit margins only 5%? Could be many reasons, including collusion. Insurance companies have teams of lawyers whose job it is to navigate existing regulation, lobby for new ones and to push for ones that hurt competition. Given how shady and complex the entire industry is, we don’t really have a reason to believe that 5% is an accurate number.
      - lotsofpulp 4y ago
        Stating that SEC filings for an entire industry are fraudulent across 7+ large companies with tens of thousands of employees each is a pretty serious accusation that I cannot entertain without proof. The other option is I stop trusting in the whole system.

lotsofpulp 4y ago

Then why are insurance company profit margins so low? Why wouldn’t they just jack up premiums irrelevant to their competitors and ignore negotiating pricing and see increasing margins? Low profit margins/multiple sellers indicates a highly competitive field, which means the businesses must be doing something stay in business.

jjoonathan 4y ago
Yeah, but "something" could be advertising, kickbacks, cherry picking, lemon dropping, making comparison difficult, selectively optimizing visible metrics while balancing with dirtbag fine print, etc etc. Competition != Productive Competition
- lotsofpulp 4y ago
  Then the competition who does not do that crap would offer lower premiums and steal business. Just like any other business that wasted money cannot compete with a business that does not waste money.
  - 31835843 4y ago
    And this is only true in a markets that are easy to enter. Starting an insurance company isn’t easy. Why are profit margins only 5%? Could be many reasons, including collusion. Insurance companies have teams of lawyers whose job it is to navigate existing regulation, lobby for new ones and to push for ones that hurt competition. Given how shady and complex the entire industry is, we don’t really have a reason to believe that 5% is an accurate number.
    - lotsofpulp 4y ago
      Stating that SEC filings for an entire industry are fraudulent across 7+ large companies with tens of thousands of employees each is a pretty serious accusation that I cannot entertain without proof. The other option is I stop trusting in the whole system.