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 →
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Q: What is the purpose of mandating gun insurance?
Required insurance for guns or gun owners should be designed to provide benefits for victims of gun accidents or violence. Insurers will automatically take appropriate steps to encourage gun safety as part of their loss control and underwriting activities.
Q: What specifically would be the best insurance system for guns?
Each state should adopt a system of no-fault insurance with a system of delivering medical and cash benefits directly to victims. This insurance should be required to be in place for any firearm brought into or kept in the state in order for that firearm to be legal. It should provide all of the benefits available to victims of motor vehicle or workplace injuries.
People who are opposed to gun insurance will often make arguments that the cost will be prohibitive. They make guesses that it would cost typical gun owners thousands of dollars and work as a backdoor way to prohibit guns. This is not actually what would happen if insurance was required. We have enough information to make estimates that would put a ceiling on the average cost and it turns out to be quite reasonable. Of course, insurers would take particular situations into account and dangerous owners and situations would pay more than average, perhaps much more; but, that’s realistic and can be handled by the owners taking measures to reduce the dangers.
In a opinion article on Property Casualty 360 titled “Major Misfire” Paul Tetrault, state and policy affairs counsel for NAMIC, denounced the move in seven states and Congress to require insurance on guns. He repeated the statements that insurance cannot cover intentional acts. This blog has several times published numerous examples of current insurance that does cover intentional and even criminal acts to the benefit of parties other than the person who does the acts. This was pointed out to NAMIC but their spokesperson emailed that the organization stands behind the article.
A plan for No-Fault insurance for guns must take into account the fact that many of the shootings are likely to be in situations where the gun cannot be traced. Even if a large portion of the guns in existence are brought into the system, there will be many claims where no specific insurer is available to pay. In NY the Motor Vehicle Accident Indemnification Corporation (MVAIC) and in Michigan the Michigan Assigned Claims Plan (MACP) are available if there is no other insurer. The large costs in Michigan where there is unlimited coverage for medical expenses have generated a lot of political backlash. The Michigan Catastrophic Claims Association pays claims over $500,000 and assesses insurance companies $175 (2012) per vehicle. Funding works by having insurers pay on the basis of either a percentage of premiums collected or a fixed amount per vehicle. A system for guns could work in the same way.
Approximately half of the medical costs are now covered by Medicare or Medicaid. If gun insurance is the primary insurance only for identified guns and the Uninsured Pool is secondary to all other insurance the funds needed would be greatly reduced. Unidentified or uninsured guns do not contribute to the incentive for insurers to have loss reduction conditions or programs in any case, so making gun insurance secondary should not undercut the safety benefits of having insurance. It would also give states an incentive to identify the guns involved in injuries to save on Medicaid expenses.
It might also be desirable to have the Uninsured Gun Pool pay claims for incidents that occur after some fixed time has elapsed for guns that are reported lost or stolen. If the time is fairly long the cost would not be too great and would give an incentive for reporting losses in a timely manner. It would make things more predictable for insurers and may help establish a robust market for gun insurance.
Getting an approximate estimate of the cost of Gun Insurance that would protect everyone is important even though the parameters of an insurance system have not been developed.In many ways, the wide experience with automobile insurance will serve as a model for the system to come.There are available sources for the numbers needed to make an estimate if one assumes a certain level of coverage and benefits.
The Insurance Information Institute publishes overall numbers for automobile insurance.The particular items that interest us are for private passenger automobile insurance (excludes commercial):