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Insurance Industry Examined After CEO Assassination
New York City Murder
On December 4, 2024, at approximately 6:30 am, a masked gunman with a grey backpack walked up behind United Healthcare CEO Brian Thompson, brandished a gun with a silencer, and fatally shot the CEO in the back. The brazen assassination occurred in front of a Hilton hotel in Midtown Manhattan where the CEO was scheduled to participate in an investor meeting. The gunman then jumped on a bicycle, rode up to Central Park, and seemingly disappeared. The whole incident was captured on video surveillance. It looked like a professional hit, perhaps even a contract killing.
The NYPD crime scene unit immediately responded to the murder scene to cordon off the block and preserve evidence. They recovered bullets and shell casings from the scene that had the words “deny” “defend” “depose” written on them. Not only was this an unveiled reference to the insurance practice of denying health insurance claims to drive up profits, but it was also a lead on the motive of the crime.
At the same time, detectives started working the case. They poured through video surveillance from local businesses and identified the masked gunman with the same grey backpack at a local Starbucks that same morning. They retrieved a discarded water bottle and power bar wrapper. They also later discovered additional video surveillance from a nearby hostel where the gunman’s mask was pulled down as he was flirting with a girl. This image was circulated throughout the country.
Suspect Found in Pennsylvania
Five days later, on December 9, 2024, a patron of an Altoona, PA McDonalds, located 300 miles outside New York City, recognized a man who matched the photo of the gunman. Local police were called, and they apprehended the suspect. The suspect had a 3D printed “ghost gun” in his possession. He also had a handwritten manifesto explaining the corporate greed of the insurance industry and justifying why “it had to happen.”
The suspect was later identified as Luigi Mangione, an affluent 26-year-old Ivy League graduate of UPenn. Evidently, Mr. Mangione sustained a surfing accident which required him to undergo a lumbar spinal fusion surgery. The x-ray of the hardware is prominently posted on his social media profile.
Apparently, the NYPD crime lab matched the ghost gun to ballistics evidence found at the scene through microscopy. Moreover, Mr. Mangione’s fingerprints were matched to latent prints pulled from the discarded Starbucks items.
Insurance Industry Profitability
The United Healthcare CEO murder has sparked a discussion about insurance industry practices. While sensible people do not condone the murder, it was palpable how many people voiced displeasure with the insurance industry. After all, 67% of personal bankruptcies are attributable to uninsured healthcare costs.
In 2023, the health insurance industry recorded a profit margin of 2.2%. Do not be fooled by that modest percentage. The health insurance industry net profits for 2023 amounted to $25 billion! And net profits do not paint the full picture. The way the industry works is that premiums are collected, pooled, and invested before claims are paid out. This is something known as the “float.” The longer it takes the claim to get paid out, the more interest can be earned. This makes insurance companies who are publicly traded very attractive investments. For example, the United Healthcare stock increased 83.3% over the last five years.
Auto Insurance Profitability
The “float” is most pronounced is the auto insurance space. A health insurance claim will typically get paid out within 60 days. But a bodily injury auto insurance claim takes much longer. A quick moving bodily injury auto insurance claim will typically get paid out in 6 months. A standard moving bodily injury auto insurance claim will typically get paid out in 12 months. A slow-moving bodily injury auto insurance claim with complex medical treatment will typically get paid out in two years. If the case is “denied, defended, and deposed” in litigation, the case can take anywhere from three to five years!
In 2020 – 2021, due to COVID-19 pandemic lock downs, the auto insurance industry experienced dramatically high profitability. Why? Because they collected billions of dollars in premiums and had to pay out a fraction of the claims that they typically do because less people were driving.
With that said, when lock downs were lifted, and the world began to normalize, the auto insurance industry’s bottom line took a hit. Not only did people seemingly forget how to drive when they got back on the road, but inflation caused auto repair prices to increase.
The insurance industry measures the success of their underwriting process through something called the “combined ratio.” A CR score above 100% means the carrier is paying out more in claims and administrative expense than what they have taken in through premiums. In 2022, the industry wide CR score was 112.2%. In 2023, the CR score dropped to 104.9%, but it still was not profitable.
To combat their losses, insurance companies sought approval from state regulatory agencies to increase their premiums. Companies like Allstate, Farmer’s, GEICO, Liberty Mutual, Nationwide, Progressive, State Farm, Travelers, and USAA where able to obtain regulatory approval to increase premiums by over 20% in some states.
Insurance companies love to point to the combined ratio (ostensibly claims), being the predominant reason that premiums increased. They say, it’s the lawyers who are driving up premiums! That is only one piece of the puzzle.
In the last five years, the Berkshire Hathaway stock (GEICO’s parent company) is up 103.7%. Do you know how Progressive is doing? Their stock is up 249.7% in the last 5 years! Investors are not pouring money into these company’s stocks because they are having a rough go. They are investing in these companies because they have long term growth and have superior cash flow by being able to control the “float”.
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Microsoft Word – Health 2023 Annual Industry Commentary
Why Auto Insurance Rates Are Out of Control – The American Prospect
Personal Auto Driving P/C Insurers to 2024 Underwriting Profit
Rate Hikes Not Bringing Profit to US Auto Insurers: Fitch
Insurers Rake In Profits as Customers Pay Soaring Premiums
UnitedHealthcare CEO killing: Luigi Mangione’s writings revealed – ABC News
What we know about Luigi Mangione, suspect charged in UnitedHealthcare CEO’s killing – CBS News
7 Insurance Stocks to Buy for Income and Growth | Investing | U.S. News
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