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i'd like some of my erstwhile neoliberal colleagues to explain why, if in 44 states shortfalls are ultimately paid for by tax payers, life insurance should remain a private for-profit industry rather than a service administered by the state? cf @ddayen.bsky.social prospect.org/2026/08/03/a...

Maybe the wrong question? Legislation could fix this, making state-backed guarantees available only if insurance company is a stand-alone corporation, or some variation thereof. The guarantee is valuable socially. It's the untoward use of it as a financial refuge that isn't.

the guarantee is essential. that’s not the issue. the issue is what role private investors serve given the necessity of the guarantee. they do not, cannot, bear the downside risk. why should they skim from the upside before any downside materializes? 1/

it doesn’t matter whether they are a standalone company or not (although obviously becoming a capital source for private equity is particularly abusive). the risk is borne either by the state or by policyholders if the state absented itself. 2/

you could have regulators insist on safe portfolios, but then what’s the advantage in having regulators make investment decisions indirectly vs a state-owned corporation making those decisions itself? /fin

It’s worked well in NY. Many insurance companies avoid ny because of regulation. Also, government has enough on its plate already. Insurance is a choice, not a part of the commons. Making it part of the government won’t inure it to corruption.

it’s a question, not advocacy, but i think it worth thinking about where we want the boundaries to be and why. i don’t think “enough on its plate” is an answer, the public sector like the private can scale, different ways have different problems. 1/

“corruption” is the private sector baseline. we don’t usually call it that because taking advantage of opportunities for self-interested gain is what private sector actors are supposed to do. 2/

is it “corrupt” for PE people to notice there’s a channel for capital whose downside risks are clipped and try to make use of that? i think that’s a silly claim to make. 3/

Er...it's corrupt if they manage to use a publicly owned utility (your idea) for that purpose. Privately? Of course not. What's legal is legal.

No. They are not managing (overtly) publicly owned utilities. They are managing notionally private insurance companies for their own gain. If it seems corrupt, that's because the privateness of those insurance is in my view purely notional, because the state bears the actual downside. 1/

I'm asking why we shouldn't simply the situation by stripping the notional private ownership and making overt what the patterns of actual risk-bearing make clear: 2/

life insurance functions by investing pubic funds, so why don't we make the insurers overtly public entities, so that self-dealing *is* actionable corruption. 3/

as things stand now, they are notionally private. the fact that they get purchased by owners most capable of profiting from a core asset (a gigantic put option written by the state), and that these owners aggressively exploit that option, is just capitalism working as advertised, innit? 4/