Aflac Incorporated

Aflac is in the business of selling insurance designed to meet needs that most insurance companies ignore. Most Americans are used to seeing a deduction from their paycheck each month that is used to provide health and life insurance coverage. But the rest of the insurance industry has largely neglected the hidden costs of sickness. When people can't work, they almost never still get paid. And many types of work such as sales that operate on a commission basis lose their luster quickly if not enough time can be devoted to keeping up.

Aflac's main differentiation with the rest of the industry is its focus on supplemental insurance policies that pay cash that can be used to cover incidental costs. Given the inherent difficulty of differentiation in the insurance industry, where all policies are essentially the same except for their price, it is astonishing that Aflac has been able to set itself apart.

The secret to Aflac's successful branding efforts has been a major advertising campaign starring an angry duck. The iconic commercials and related line of plush toys have earned a clear space in the nation's cultural consciousness. Unfortunately, Aflac's success will prove difficult to replicate overseas. Aflac's Japanese duck is friendly, reassuring and far less successful. If Aflac's success is the result of a unique cultural connection with its customers, the company is quite secure in the United States but vulnerable everywhere else.

Aetna, Inc.

Aetna is one of the largest diversified health care benefits companies in the world with more than 14 million covered by its most popular policies. More than 400,000 doctors and over 4200 hospitals provide care for Aetna's policy holders. Net income of about $1.7 billion on total revenues of $25 billion isn't tremendously profitable, but the company's over 27,000 employees will be well taken care of.

The principal risk to private health insurers in the United States is that the federal government will step in to either directly limit the industry's profits or otherwise regulate the total cost of health care lower by taking it out on the middle men. While the enormous lobbying power of the insurance industry has already been working on this problem for years, a very real possibility these days is that the federal government will allow private insurers to continue to operate but will sponsor a chosen proxy that will invariably dominate the market.

Government certainly isn't synonymous with efficiency, but the entire health care industry is ripe for serious reform. In a very real sense, Aetna's current size is a powerful hedge against its interests being ignored when Congress finally addresses the issue after the next election.