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There’s no universal %margin on turnover that applies across all sectors that tells you whether a market is efficient or not. If I supply you widgets for $1000/
by owisd 4y ago
There’s no universal %margin on turnover that applies across all sectors that tells you whether a market is efficient or not. If I supply you widgets for $1000/ea and take a $50 management fee that we assume is fair for the work involved, then if there’s a shortage of widget materials that pushes the price up to $10000/ea, it’s no extra work for me so the fair management fee is still $50. If I charge $500 to keep the % the same I’m adding no extra value for that extra $450.
Building contractors are an example of an industry that runs on razor thin profit margins in % turnover terms, because all they’re doing is passing on the cost of labour and materials from their suppliers and subcontractors onto their clients and just making their profit adding value in a thin management layer. Which sounds a lot more analogous to insurers than industries that earn 5% profit on their turnover.
- lotsofpulp 4y agoThere are legions of people working at UHC/Anthen/CVS/Cigna/Humana/Molina/Centene trying to price insurance as competitively as possible to win as much business as possible. If they could price it lower and win more business, it is safe to assume they would be. If they could price it higher, then why would they choose to only earn low single digit profit margins? You have 7 huge publicly traded companies competing with each other, and unless there is proof of collusion, it is probably safe to conclude that they are running their businesses as well as they could be. If you think otherwise, then you have discovered an arbitrage opportunity, which would be worth quite a bit so you should be able to pitch it to someone who wants to invest.