rickyp wrote: You may change insurance law but I see no need to change it
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This is my hypothetical isn't it? I get to paint the scenario ?
So kindly bugger off Mr. Insurance agent guy .
.. cause in my world you need to be covered for insurance for any harm that comes out of the use of your firearm, that can be proven to be illegal activity on your part, or negligence on your part.
You are convicted of murdering someone, your insurance company needs to shell out for damages to the murder victims survivors. (OJ had to pay!)
This will be a first in the history of insurance. There's a good reason for not wanting to insure the risks of doing illegal things. Commercial insurance is considered to be something of a public service because it encourages entrepreneurs to take chances. I can start up a factory that makes some fancy high-tech shellac even though I haven't enough cash reserves to pay for the damages that would result from an explosion of the volatile compounds involved because I do have enough to pay for a year's worth of liability insurance. This is one of those rare cases where a cool-sounding social theory actually does work in practice. Insurance does make lots of innovation and entrepreneurship possible. If you insure the risks of financial loss associated with illegal activity you lower the hurdle of engaging in that risky behavior. Since illegal activity often entails the risk of incarceration, it may seem that the additional risk of having to pay for damages caused wouldn't count for much. If we're talking about crimes of passion neither risk seems to have much traction, but what about the crime of vandalism? If I hold a grudge against a retail store and throw a brick through their window I'd have to pay for the damages if caught, but if I shoot out the window with a .22 rifle my insurance company would have to pay.
Would this be covered: at my shellac factory I produce some waste as a by-product that's a nasty liquid full of numerous poisons. Out back, near the river, I've got a 55-gallon drum full of it. If I open the drum and pour the stuff in the river, and am seen, I'm going to be stuck paying millions in damages. My regular business insurance, which does cover accidental spills, isn't going to cover me because this was no accident - it was an intentional act. But if I stand outside the fence and shoot at the drum with my shotgun, thus causing the spill and pollution, my homeowner's policy (which includes gun coverage - or my "gun policy" if you want to have them done separately) will pay the millions?
How about this: I have a dispute with the guy next door to my shellac factory. He gets so upset with me that he decides, in a blind rage, to destroy my business by blowing up my factory. If, in this rage, he storms through my lobby and into the work area where he then lights a torch and throws it into my tank of volatile liquids, he'll have to pay damages. If, however, he instead creates the explosion by shooting holes in my high-pressure apparatus, his insurer is the one on the line. Now what if he's not so much in a rage but slightly more rational and calculating...
You could probably shoot some smallish holes in these scenarios, but I could come up with hundreds of them. I'm sympathetic to your ultimate goals, I think, but I suspect you're on the wrong track trying to achieve them. I see three potential public goods coming from your insurance idea. If I could find a better way to get all three satisfied would that make you happy?
1) Your idea will cause some underwriting to be done, thus effecting an exclusion of the riskiest gun-owners.
2) By increasing the cost of gun ownership for everyone you reduce the total gun trade.
3) You create a system whereby the victims of gun use would be compensated even if the perpetrator of the damages is not a millionaire.
Underwriting: insurance companies have no expertise in assessing this risk. They would have to guess at which data to collect and analyze in order to make discriminatory decisions. I'm sure they'd first look at criminal records but that's already done as part of the government's licensing routine, is it not? Perhaps they'd pull a credit report. It's hard to see a solid statistical correlation there, however. I know what they'd do: they'd red line. I can pull up a map online showing where in my city various types of crimes have been committed in the past year. Insurance companies could amass a data set like this that allows them to identify geographic areas where gun crimes are most frequent. They could then simply deny coverage to anyone living in that zone. We already know that black people are, on average, much more likely to be victims of gun crime than white people. Wanna' bet that this underwriting will end up being accused of being racist? So something different will have to be tried. Personality tests? What? How do you assess propensity to misuse guns?
If there are experts in assessing who is or is not dangerous in this regard, they're the US Secret Service; agents of the Bureau of Alcohol, Tobacco, Firearms and Explosives; your average beat cop; and other law enforcement officials plus some (but certainly not all) mental health professionals. Since your gun plans include mandatory registration, it seems to me that any underwriting that could be done could be done better at that stage by experts whose only motive is crime prevention, than by insurance personnel whose main motive is profit-making. It's not that I deny the power of the profit motive. Quite the contrary. Do you what happens when people are rejected by underwriters working for standard insurance companies? They go to sub-standard carriers. If the market isn't outlawed, there's usually some insurance company willing to write the bad risks for a higher premium. No underwriting system is going to accomplish more than weed out those who,
on average, present a risk that's maybe 50% to 100% more than normal. Sub-standard carriers will insure them for a premium that's 50% to 100% more than normal. Wouldn't you rather use law and regulation instead of insurance underwriting, so you can for sure exclude high-risk individuals?
Negative incentive: insurance premiums won't be high. As I have said, policies already cover negligence. Damages due to criminal activity are a tiny fraction of damages due to autos, and auto liability premiums aren't crazy high. Guns are already expensive; an extra $50 a year or something like that won't be all that effective. Why not just use the registration/licensing process plus taxing authority? Put a flat $500 tax on guns for each chamber; a six-shooter would be taxed three grand, a double-barreled shotgun $1000, and so on. Maybe vary the tax by caliber as well. Then put a $10 tax on each bullet. Add some crazy-high licensing fees and make it that licenses have to be renewed
quarterly! Renewal must be done in person and you could arrange it so the process is worse than any Dept. of Motor Vehicles ever was. (Make sure all employees are members of SIEU.) Now we're talking disincentive, baby!
Indemnity pool: have those taxes and fees used to compensate victims of gun crime and misuse, and for other good and relevant purposes like gun safety training, non-violence promotion, and even the mental health intervention teams you had mentioned once in another thread. Insurance company profits just line the pockets of nasty capitalists; with my scheme you get to do all sorts of fun social engineering. ;-)
rickyp wrote:If you think insurance companies won't find an ingenious way to screen out the bad risks, you have less regard for the insurance industry than I.
Familiarity breeds contempt.
04 Mar 2011, 3:39 pm 
