Letters to the Editor
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This is why life insurance companies.....
...Well that and the fact that insurance companies essentially keep two sets of books on the business. One for insurance operations and one for investment operations. The key is to show zero or less than zero gains on the insurance side of the business where the bulk of the taxes and regulation is, and to make most of the earnings off the investment side of the business concurrently which has a better regulatory and tax position.
Of course on the M+M book for life, DI and similar products, yes you're right, the experience rated policies are very well understood across selected populations.
But the wider issue is, you can't really have it both ways. You can't build a wall around all the financial institutions you choose to dislike today and arrange something so that you're not harmed by their failures while at the same time, your pension fund, IRA, personal equity and such are locked up in 'other' firms you choose to participate in. What for example should you do if TIAA-CREF chose to invest poorly and wiped out 50% of the worth of 10 million teachers' pension funds?
If we remember Enron, one thing that was crystal clear was that many of the people who lost their shirts did the ONE thing all financial professionals tell you NOT to do - invest all or most of your money in YOUR OWN company. That's ALWAYS a dumb thing to do. Now is Enron guilty? Yes, but people got chopped in the neck BECAUSE they did what any sane person told them not to do. If they had taken that advice they would have lost their jobs but not all their money.