Precursors to Gun Insurance

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Ideally, we should adopt a system of insurance that protects and compensates all of the victims of gun violence as a single well thought-out package.  The various terms would weight the balance between minimizing the interference with responsible peoples use of firearms and the need to keep them away from irresponsible people.  There are many factors that should work together to give the best overall results.  But, that isn’t the way that most systems of control and regulation are developed.  They come about incrementally.  Even before we adopt any requirements for ordinary gun owners and users to be covered by insurance, there are are changes that could set the state.  Insurance is a means of maintaining a system and culture of responsibility.  Keeping and use of firearms, unlike any other activity in our society, has accrued a large number of provisions, legal and of other kinds, to promote a culture of irresponsibility.  If this is rolled back in stages, use of insurance will emerge as a natural step.  It will be so because it will be a way of facilitating the responsible use of firearms in a context of demanded responsibility.

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Is Self-Defense Insurance Legal in California?

The National Rifle Association (NRA) and several other companies or organizations sell or sponsor the sale of insurance to defend and indemnify gun owners from liability in self defense situations.  They do this on a nationwide basis and promise protection in a wide range of situations where the purpose of the gun use is to defend ones person or property.  The point of this insurance is to have no restriction against covering self-defense as an intentional or willful act.  The question raised in this post is: How can this be possible under California’s Insurance Code?

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How Would Insurers Stop Straw Purchases?

One of the main feeders into the pool of illegal guns that cause a large portion of the deaths and injuries is those guns that are obtained through straw purchases.  A straw purchase is one that is done by a person with a clean record that can pass a background check to obtain a gun for a prohibited person.  For the purposes of this writing straw purchases are distinguished from other channels for guns to enter dangerous hands including:

  • Unchecked sales or gifts after the initial purchase
  • Theft of guns
  • Previously owned guns by persons who subsequently become prohibited persons
  • Guns used by persons who are not prohibited from having guns but who are clearly dangerous in hindsight

Straw purchases are the primary input to the “Iron Pipeline” which is the name that New York gives to the practice of buying guns in low regulation states such as Virginia and illegally smuggling them into New York for sale to prohibited persons.  The hate killing by a white supremacist in Kansas City in April, 2014 was with a straw purchased weapon.

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The Question of Pricing Mandatory Gun Insurance

In addition to policy arguments such as those against putting costs and responsibilities on the public or burdens on gun owners, the insurance industry has offered two major substantive arguments against mandating gun insurance.  The first, which is the claim that insurance does not and cannot cover, intentional or criminal arguments is simply false.  This has been extensively explored by this blog at the post entitled  “Gun Insurance for Willful, Intentional & Criminal Acts.”  The second argument is basically a “Chicken and Egg” objection.  They claim that insurers have no experience to price such insurance and that without ratings experience such insurance cannot be sold.  This post is to show the reasons that this objection is of greatly diminished importance in the case of mandatory gun insurance.

Why can’t insurers simply add up the losses that are occurring as they are reported by emergency rooms, as part of claims for various other kinds of insurance, media reports and government statistics and assign them different weights in an estimate?  The basic reason is that, with voluntary insurance, the people who will actually buy the insurance are not a representative sample of the risk exposed public.  Sometimes that works for the insurers advantage because people can buy insurance because they are more than typically responsible in many ways and produce fewer than average claims.  But those who know that they have an elevated risk can buy insurance for that reason as well. Continue reading

Mandatory Insurance for Armed Professions is Normal

We see armed people working around us on a daily basis.  Some of these private professionals are highly visible such as guards for banks and armored car services and some are less obvious to the eye such as private investigators or detectives.  In almost all states there are requirements for them to have licenses and in most states they must have insurance or bonds that function as insurance.  But there is tremendous variation in the requirements and in the definitions and terminology of the various roles.

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New Bill SB2646 for Gun Insurance in Illinois Covers Intentional

Illinois Majority Caucus Chairman Ira I. Silverstein has introduced a new bill (SB2656) in the Illinois General Assembly to require that gun owners have liability insurance.  This bill covers willful as well as accidental shootings by the owner or others.  It covers lost or stolen guns until they are reported.

This would be very helpful legislation if adopted as introduced and could form the basis of a more detailed and developed requirement to cover more victims.  Because it designates continued responsibility for unreported stolen guns it recognized the important of gun theft for supply to illegal gun possession.

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Voluntary Insurance and Strict Liability as Good First Steps

Much of this blog is about how insurance should be designed and how it would work if an ideal insurance mandate was in place.  Opponents of such a mandate point out real and imagined problems that would prevent such insurance from working.  When the possibilities are examined the problems turn out only to apply to particular models of insurance and can be avoided by designing the insurance for the particular nature of guns and gun violence.

But there are also transitional problems that could block adoption of an insurance mandate that would work well once it was in place.  The most important of these problems is the fact that gun insurance that would protect victims does not exist currently.  The insurance that is designed to protect gun owners from accidental or self-defense incidents is very narrow and is not adapted to the need to protect victims even to the extent that existing liability laws could allow the redress in the courts.

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The Role of Reinsurance in Mandated Gun Insurance

A gun insurance system designed to encourage safe practices will need to maintain insurer responsibility for lost, stolen or improperly transferred guns. This is essential also to using continuing insurer responsibility as the means of guaranteeing coverage of all guns once they enter the system. Insurers will face risks that continue into the indefinite future for guns whose location is unknown. Specialists in assessing these risks will be needed to encourage the sale of this insurance. This is often done by specialty reinsurance companies in various areas in our economy.

Reinsurance is the practice of insurers buying their own insurance from other companies and thereby transferring part of the risk out of their hands.

Separation of risk after loss or theft

The primary insurer will be able to treat their risk as that of having to buy reinsurance in the event that the gun owner loses control of the insured gun. As the specialty reinsurers establish a market with prices and terms for assuming the risks, the primary insurers will become able to view themselves as selling insurance for the risk of having such a loss of control of the gun. This attitude on the part of insurers is just what is needed to have them take the best role in demanding safe practices. They will put terms in their policies that are designed to stop guns from straying and, thereby, protect the public from the effects of stolen and diverted guns.

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Federal Mandate for Top-Down Insurance

A federal requirement that all manufacturers and importers have insurance that protects victims of their products with a top-down provision requiring it to continue until replaced is the core of a successful system for guns. Ideally this requirement would specify the terms and benefits laid out in the next level for state legislation that seriously provides for victims, but this will describe the minimum requirements that should be specified on a national level.

A bill (H.R.1369) proposing mandated gun insurance was introduced in the United States Congress in 2013, but it did not specify details of the insurance required in the language of its introduced.

The legislation should require that, before manufacturing or importing a firearm, insurance must be accepted by an insurance company specifically authorized to issue such insurance by some state. In order to make certain that the required financial stability is available, all such insurers should be required to join a pool backed by all such insurers guaranteeing each insurers ability to pay valid claims. Once an insurer accepts responsibility for a certain gun, that responsibility is only relinquished when another qualified insurer takes it on. Continue reading

Should Gun Owner’s Insurance Pay Victims After Gun Theft?

The insurance model recommended by this blog is designed to have insurer retain responsibility for guns after they are stolen.  That means that if a responsible gun owner has a burglary and a gun is stolen and then after the gun changes hands, goes underground and turns up to injure someone in a distant location then the gun owner’s insurance will have to pay.  Gun defenders are quick to object and say that the burglar and the shooter are responsible and the gun owner shouldn’t be held to account for their acts.

In those cases the criminals are, of course,  responsible and if they can be caught and have resources they should be the first to pay to the injured party.  Unfortunately, they often aren’t caught and they don’t have resources and, if they go to prison for their crimes, are unlikely to earn enough in the future to redress the damage they have done.  So the question is should the legal gun owner or the gun owner’s insurance be held responsible in light of their role as enablers of this unfortunate situation.  My answer is that they should be.

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