Insurance is a huge topic these days, from workers comp in CA to Medicare in Washington, we all want coverage and benefits but don’t what high premiums. So where is the magic line that gives us the best bang for our buck?
Let’s look just a little deeper at the focus on cuts as opposed to premiums. What are the insurance companies going to cut? Jets for executive travel? Nah. How about employee benefits? Probably not. Salaries? Number of employees? No, no, no.

They are going to cut claims payouts. That’s their cost. They simply won’t pay out as much as they used to. So medical insurance will cover less and provide a lower care level. Car insurance will be even slower in paying and look even harder for a loophole to not pay. Homeowners won’t this, and Disability won’t that. The key to controlling costs is not paying claims. Its more profitable to hire people and increase overhead to try get out of claims than it is to pay them in many cases.
Why is this almost a uniform opinion among executives of insurance companies? Because they know that selling involves a combination of three things, price, quality and service. They can’t sell below market price and try to make money. They can’t sell above it and not have clients go next door. Also, they have to spend money on service to keep clients that haven’t had claims happy by handling billing and other issues. But where they can cut without affecting sales is in the quality of their claims payouts. They don’t want a client that has a lot of claims anyway so if they get frustrated and leave, that’s fine with them. So the business model is to make it easy to get the premiums in, and make money on not letting them out.
So as for them making themselves more efficient, I have to wonder if that’s true. Cynical aren’t I?

Bonds will perform horribly over the next period as interest rates rise, bond prices will fall. What I think is interesting, is that some are essentially giving the US Federal reserve credit for the world economy. The US fed keeping rates low will help the rest of the world, and the saying that, so goes the US, so goes the world, is pretty true. No other country, or set of countries like the EU, has the size or might to bring about a global recovery. If we go down, the world goes down and the Fed knows it. Better the small pain of a little inflation than the catastrophic pain of a global recession/deflationairy depression.

There are significant differences between hedge funds and mutual funds. With hedge funds, there surely seems to be a difference in our ability to access top financial people based on our net worth. The ability of the manager to take any position they want (long, short, leverage, stocks, bonds, currencies, derivitives, domestic, foriegn, etc.). This provides a flexibility not available to mutual fund managers that have a prospectus that outlines the rules of trading for the fund. The second and perhaps most important aspect is the hedge fund managers get a % of the profits whereas mutual fund managers only get a small fee. So the hedge fund manager doesn’t get paid until the investors do, as you point out. This seems to align the goals of the manager with the investor much better than the mutual fund industry which many have called just marketing firms with a investment company attached. In the mutual fund business, you try to beat your bench mark, something 80% of them don’t do. They make money off fee’s which are set regardless of preformance.