How Would Insurers Stop Straw Purchases?

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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.

If compulsory gun insurance is to work to reduce the level of gun violence, it needs to reduce the number of guns in dangerous hands without being excessively a burden to gun ownership by the larger part of the public.  How can it do this?

Insurance will accomplish this because insurers will take measures in their pricing, sales decisions and policy terms to limit their exposure.  The insurance recommended here would compensate victims on the basis of their losses not liability of the gun owner and would continue to apply to a given gun until it is replaced by other insurance.  Because an insurer would still be on the hook after a gun is lost, stolen or illegally transferred, it would take steps to prevent that from happening.

Any gun can kill, but some guns are more likely to be involved in violence than others.  The distinctions can be obvious such as the difference between handguns and long guns or the relative safety of hunting rifles with limited ammunition capacity.  Insurers will take these differences into account in the same way that they take the model of car into account for pricing car insurance.  It is much more difficult for a government to make such distinctions as can be seen in the never ending debate over the definition of an “assault weapon.”  The difference between models may be in the convenience and effectiveness of a certain model for misuse or in the statistical makeup of the body of persons who chose that model.  In the case of cars, insurers take both into account.

In low risk situations, insurers are likely to simplify the process.  They would simply sell the insurance with insured people agreeing to do things like not transfer the gun to anyone without replacement insurance, to follow safe practices and to report loss or theft of the gun.  It’s likely that insurance will evolve in these cases to be a low cost rider on homeowners or renters insurance.  In some cases, it may even be at no additional cost as a way to get a highly desirable kind of insurance customer.

The higher the risk the more complex the insurers would make the process. Here are some things they might do in certain cases:

  • Require prepayment of a certain period of insurance
  • Assess high premiums or refuse insurance if cases of excessive risk
  • Give lower rates if the gun is stored at a range or hunting club
  • Require proof of the purchase or ownership of a gun safe
  • Require the owner of a lost or stolen gun to pay for reinsurance to cover future losses
  • Require the owner of a dangerous gun to periodically prove that the weapon was still in their possession
  • Require an agreement to surrender the gun to the insurer if certain situations such as the owner becoming a prohibited person arise
  • Require proof of financial responsibility for future insurance premiums
  • Investigate reported losses or thefts to make sure they are not being used as a cover for improper transfer and to recover weapons where possible
  • Require proof of compliance with any state or local firearms laws

The risk to an insurer of a customer turning out to have made a straw purchase for a person who cannot get insurance is substantial.  The insurer is likely to use policies such as those listed above to reduce that risk.  This will in turn reduce the risk to the public.

Insurers are also likely to work for the adoption of federal, state and local laws and regulations that will really improve gun safety.  They have been quite successful in this in the case of motor vehicles, funding safety research and lobbying for measures such as child car seats, use of seat belts and non-use of cell phones.

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

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

Questions and Answers on Mandating Gun Insurance.

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This post is a good place to start if you’re new to this blog.  Scan the questions and follow the <More> link if you have an interest in a particular area

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. <More>

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.

Continue reading

Projected Costs for Gun Insurance are Low!

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.

There are two basic reasons that mandatory gun insurance would not be expensive, first there are a huge number of guns and gun owners in the United States to share the cost and, secondly, guns while deadly and causing many deaths do not cause nearly as many injuries as motor vehicles or workplace accidents.  Injuries (and smashed cars) are the great cost for insurers.  The Insurance Information Institute reports 2.5 million auto liability insurance claims per year compared to only about 73,000 non-fatal gun injuries reported by the CDC’s WISQAR’s system.  The report linked below shows that over 8 million persons received compensation for workplace injuries in a single year.

The kind of comprehensive insurance for gun violence victims advocated by this blog would pay three kinds of benefits–medical costs, lost wages and a death benefit.  This is what is covered by existing no-fault insurance in other areas such as motor vehicles and worker’s compensation.

Looking at medical costs, PIRE estimates the total medical cost of firearm injury at $2.88 Billion for 2010 including costs for fatalities.  We will assume that all of these costs are covered by gun insurance for our calculations.

To get an estimate of lost wages we can look at a report by the National Academy of Social Insurance on costs for Worker’s Compensation.  This shows for 2005 that total medical benefits paid as Worker’s Compensation were $25.3 Billion and Cash Benefits were $26.6 Billion.  This ratio of approximately 1-1 if applied to gun insurance benefits would probably greatly overestimate the lost wages because gun victims are often unemployed or paid lower than average wages.  For the purposes of this estimate, it will be assumed that the lost wage benefits will equal the medical benefits.

To estimate death benefits we can assume a payment of $50,000 per non-suicide death.  This is higher than the automobile insurance limits in almost all states.  Multiplied by the annual figure for 2010 of non-suicide gun deaths from the CDC of 12,028 this gives a total suicide benefit cost of $601 million.

Claims for covering all gun injuries would be about $6 billion per year

.Adding the $2.88 billion in medical costs to an equal amount for lost wages and $601 million for death benefits means that insurers could pay all of the economic costs for a total of $6.06 billion in claim payments per year.

Premiums for this insurance would be about $9 billion per year.

The Insurance Information Institute fact sheet shows that in 2010 the total incurred losses to insurers for private passenger automobiles from liability insurance was $64.1 billion.  The total premiums collected for corresponding insurance was $97.6 billion.  If the same claims ratio applies to gun insurance then the total premium for insuring all guns would be $9.2 billion dollars.  We have about the same number of guns as cars but insuring the cars is 10 times the cost or 17 times the cost if we include collision/comprehensive insurance.

This is about $30 per gun and most gun owners would pay less.

Because there are about 300,000,000 guns in private hands in the United States the average cost per gun for this widespread generous insurance would be about $30 per gun per year.  Hardly a prohibitive figure.  But this is only an average.  For responsible gun owners who have a few guns for hunting or a pistol at home for self defense, it would be much lower.  For those who carry guns around it would probably be higher.  For very dangerous persons and situation such as illegal drug dealers it would be much higher.  I think that for the majority of guns which represent very low dangers, it could be handled as a low cost or even a no additional cost provision added to homeowners or renters insurance.

There are a number of factors which could make the cost even lower:

  • The insurers loss control measures such as education and research may work to reduce gun injuries and deaths.
  • The guns which evade a requirement for having insurance would be those with the greatest risks perhaps by being in the hands of criminals.  This would mean the the guns having insurance would on the average be safer
  • This insurance is assumed to have really generous benefits which go to all persons injured.  The benefits actually paid would be some subset of this.
  • Any improvement in gun safety due to other causes would result in a reduced cost to insurers.

Those who think that mandated gun insurance would be so costly as to unfairly burden gun owners or is intended as a covert way to prohibit guns are simply wrong.  It’s a way to aid victims and encourage safe practices.  Insurance facilitates many activities that have risks and can do this for guns as well.

Gun Insurance for Willful, Intentional & Criminal Acts.

One of the things that opponents of gun insurance or insurance trade representatives often say is that insurance cannot cover intentional or criminal acts.  This is simply false.

There are many kinds of insurance that cover such acts.  The key is that the insurance pays to the victim and not the wrongdoer.  It doesn’t have to matter if the deed is done by the purchaser of the insurance or another insured person.  It is important the the policy be written to make this clear; policies that exist at least partially for the benefit of third parties typically work that way.  Insurance that is compelled by law for an activity often applies in these cases even if it’s not spelled out in the policy, but courts differ on this point and an explicit requirement in the legislation and in policy language is a good idea.

Insurance textbooks teach that whether an act is accidental or willful is determined from the viewpoint of the insured.  Mandatory insurance should treat a victim as an also insured party. This is necessary because the purpose of many kinds of insurance is to protect the insured against the willful acts of outsiders. An example would be a day care center that is negligent in screening visitors who might commit an abuse against a child.  From that viewpoint, a act that is deliberate on the part of the abuser is an accident to the victim.

Insurance that pays to innocent victims for willful, intentional or even criminal acts is common when the purpose of the insurance is to protect third parties. Despite the statements from insurance industry representatives– “if you use your car as a weapon to intentionally run down a pedestrian or another motorist, there is no coverage”, motor vehicle insurance in many states would in fact cover exactly that case. The case commonly cited in legal discussions to illustrate this point is Wheeler v. O’Connell, 297 Mass. 549 , 553 (1937) This case held that compulsory insurance was very different than voluntary insurance, that public policy considerations did not prevent coverage of intentional acts, and that the insurance terms should be interpreted in light of the intention of the compulsory insurance law. Many later cases in various states have taken the same position even in situations where insured persons committed serious crimes including murder.

It was also often stated that insurance would not pay if a homeowner intentionally burned down his or her house. Banks and mortgage holders were not willing to take on this risk and demanded coverage.  There are two types of mortgage clauses in homeowner’s insurance. The most common type today is the “union” or “standard” or “New York” mortgage clause, which would pay a mortgagee such a case. My own homeowners insurance (USAA) has such a clause stating:

If we deny your claim because you or any other “insured” has failed to comply with the terms and conditions of this policy that denial shall not apply to a valid claim of the mortgagee.

Standard insurance text books discuss this mortgage clause and point out that it is included specifically to pay lenders in cases of arson or other misbehavior on the part of the insured homeowner.  Because homeowners insurance is not mandatory, policies vary on whether they will pay to one owner when a co-owner burns down the house occupied by a spouse in a domestic violence incident.  This can hinge on details of the policy language such as whether it says “an insured” or “the insured” and illustrates the importance of requiring the right terms.

Other examples of insurance that pay to victims for criminal acts of policyholders or otherwise insured persons include worker’s compensation for acts of co-workers and often by employers, businesses for acts of employees and bonds by Locksmiths or fiduciaries.

The point of these examples is that liability and other kinds of insurance can pay innocent third parties for intentional acts of otherwise insured parties.   Mandatory firearm insurance should be designed like the examples above to protect the victims. Public policy, which is often said to prohibit such insurance, only prevents the malefactor from benefiting.  In light of these and of many other kinds of insurance that pay innocent parties regardless of the intent of others, there is no problem with public policy for providing insurance covering willful acts. It may, however, be appropriate for insurance regulators to allow insurers to have subrogation clauses to recover their money working against the misfeasors themselves.

Enacting a Concealed Carry Insurance Mandate

While it would be ideal to have a gun insurance adopted at a single time as one well designed national mandate, it’s likely that political reality will force it to come into being in stages.  The logical place to start is for the more amenable states to require insurance for holders of permits to carry firearms in public.  If this can be extended to general coverage of guns in some of these states, the stage is set for a federal mandate for top-down insurance which extends into any state requiring insurance.  This in turn will encourage other states to have their own requirements in order not to have their citizens paying for insurance without their state receiving benefits for victims.

1. Concealed Carry as a Start and End in Itself

Mandating gun insurance for holders of permits to carry weapons in public is much simpler than mandating gun insurance in general.  Permit holders are already registered with state government agencies; there is no need for an additional registration system.  They are generally responsible people who have already shown their willingness to cooperate with reasonable regulations.  Insurers will find these people to be desirable customers.  Most measures to deal with gun violence have to deal with the flood of illegal weapons that come from states with weak regulation of gun trafficking.  But, states requiring insurance for permits can simply refuse to recognize permits from other states without insurance requirements or require proof of insurance in addition to such a permit.

Starting by requiring insurance for permit holders is not only easier to implement, but it will address quite a few additional dangers for guns carried in public that do not apply to guns kept for self-defense in the home:

  • Citizens who do not want to be exposed to the dangers of guns have no choice to avoid them.
  • People carrying guns often need to leave them in cars or other less protected places, encouraging theft and misuse.
  • The new “Stand Your Ground” laws often prevent innocent citizens injured in incidents from receiving compensation in shooting incidents.
  • Private property owners and businesses may be at legal risk from the guns brought by their visitors and customers.
  • The “bad guy” in a situation may respond with additional violence perhaps turning a robbery into a murder.

These additional dangers give the states an incentive to make this requirement.  Several states have instituted a provision for issuing these permits under great pressure from gun proponents or even in the case of Illinois from a federal court.  In other cases the state legislature has reluctantly expanded the permit system from a “may issue” system where local law enforcement officials may or may not approve the issuance of a permit based on the need in the particular case to a “shall issue” system where permits must be given to any person meeting defined requirements.  Those states which are uncomfortable with their system of issuing permits are likely to welcome required insurance as a way to provide a guarantee of responsibility on the part of permitees.

Enforcement of the insurance requirement can be made through the permitting process and because it is attached to the person holding the permit rather than directly to identified guns there is no limit to legally owned firearms.  Invalidation of the permit is a readily available way to enforce continuance.  The benefits can be defined by reference to a pre-existing system such as worker’s compensation in any state or no-fault motor vehicle insurance if available in that state.

Example of Possible Legislation for Carry Permit Insurance

 

AN ACT

Relating to requiring insurance for Concealed Carry Weapons Permits and establishing strict liability for injuries and death resulting from firearms used under such permits.

 

SECTION 1. As used in sections 2 to 5 of this Act:

(1) “Covered Firearm” means any firearm owned, controlled or used by a Covered Person.  Includes any otherwise included Firearm which is lost or stolen until the loss or theft is reported to a law enforcement agency in the area where the loss or theft occurred.[a]

(2)  “Covered Person” means any person holding a [Name of Permit].[b]

(3) “Evidence of Insurance” means a card issued by an insurer authorized to issue Firearm Permit Insurance which lists the name of the Covered Person and the dates of coverage and certifies the existence of Firearm Permit Insurance.

(4) “Firearm” has the meaning of any firearm or other weapon that is covered by [Name of Permit].[c]

(5)  “Firearm Permit Insurance” means insurance issued to comply with the requirements of this act by an insurer authorized to issue such insurance by the [State Insurance Regulatory Agency].

(6) “Issuing Agency” means [Name of state permit issuer]

(7) “Worker’s Compensation Equivalent Benefits” means all benefits that would be provided for a similar injury or death arising out of employment under [Workers Compensation Law].[d]

SECTION 2.  Worker’s Compensation Equivalent Benefits Requirement

(1) Firearm Permit Insurance must provide Worker’s Compensation Equivalent Benefits to any person injured in an incident involving a Covered Firearm.[e]

(2) A person injured after display, use or threatened use of a Covered Firearm is considered to be injured in an incident involving the Covered Firearm, regardless of the actual agency of injury.[f]

(3) A person injured in the act of a felony that started prior to the display, use or threatened use of the Covered Firearm may be denied Worker’s Compensation Equivalent Benefits by the insurer.[g]

(4) For the purposes of this section the average wage of any injured person whether or not actually employed or employable shall not be considered less than the average weekly wage of the state.[h]

(5) The minimum death benefit provided for a person killed in an incident involving a Covered Firearm is $100,000.[i]

(6) Nothing in this section will be construed to relieve the owner or user for liability incurred because of injury involving a Covered Firearm.[j]

SECTION 3. Liability Insurance Requirement

(1) Firearm Permit Insurance must provide liability coverage to each covered person in an amount of not less than $500,000.

(2) The liability insurance must cover liability for negligent injury caused by a Covered Firearm in any location.[k]

(3) The liability insurance must cover all liability incurred under section 5 of this act.

SECTION 4. Requirement and Proof of Insurance

(1) Any Covered Person must maintain Firearm Permit Insurance in place at any time a [Name of Permit] is in effect.

(2) A [Name of Permit] is immediately invalidated upon lapse of Firearm Permit Insurance due to expiration, failure to pay premiums, failure to comply with requirements of the insurer or other cause.

(3) An insurer issuing Firearm Permit Insurance must notify the Issuing Agency prior to lapse of Firearm Permit Insurance.  The insurer is responsible for claims under the insurance for incidents that occur prior to 30 days after that notice.[l]

(4) Failure to return the [Name of Permit] to the Issuing Agency within 10 days of lapse of Firearm Permit Insurance is grounds for refusal to reissue the permit for a period of 2 years.

(5) At any time a [Name of Permit] is required the Covered Person must have Evidence of Insurance available for immediate inspection.[m]

SECTION 5. Strict Liability for injuries involving Covered Firearms

(1) The owner or user of a Covered Firearm is liable without consideration of negligence or intent and regardless of any other law granting immunity for any injury involving the Covered Firearm at any location other than that person’s home or a place of business under that person’s control.[n]

(2) This section does not apply to any injury where the injured person is in the act of committing a felony that started prior to any display, use or threat of use of the Covered Firearm.


[a] An important reason for including stolen firearms is that a gun may be taken from the Covered Person or from a place or vehicle where it was left by the Covered Person and used by another.  This is one of the major risks of carrying firearms in public places.

[b] A law enforcement officer is not generally required to have a permit and so would not be covered.

[c] In most states this means that the insurance will not cover long guns.

[d] All states have worker’s compensation insurance systems.  Use of these systems will allow effective insurance to be defined without setting up a new system.  Due the much smaller number of injuries due to guns than to employment accidents this is efficient.  It is also desirable to use an existing system so that the practicality of the system is demonstrated by the preexisting experience.  Most state worker’s compensation systems have rules for intentional acts by co-workers or third parties and for self-inflicted injuries that are workable when applied to gun injuries.    Opportunities for fraud by injured persons are much more limited than in worker’s compensation or in no-fault motor vehicle insurance because guns rarely cause the kinds of soft tissue injury that leads to uncertainties in the diagnosis or required treatment.

[e] Incidents that are covered by the insurance are not limited to those occurring in places where the permit is required.  This is appropriate because persons having permits are more likely to have injuries produced by the permitted firearms in their homes and places of business.  They may have additional weapons and keep these weapons outside of locked storage in readiness for taking them into the community.

[f] An example of another agency is that the use or threatened use of a Covered Firearm may elicit return gunfire or other hostile behavior from the person against whom the use or threat was directed.  A person may also be injured in attempting to flee the area where the Covered Firearm was used.

[g] The limitation of the denial to felonious acts started prior to the use of the Covered Firearm is because after the incident starts, there may be a response with an unclear or controversial nature.  It insurer should not be allowed to use this uncertainty to deny coverage.

[h] Average weekly wage is defined in most state worker’s compensation systems.  It is important that there be compensation to persons who are not employed currently or are unemployable due to being children, having the duty to care for another person or being disabled prior to the shooting incident.

[i] This is higher than for motor vehicle insurance in most states, but should not be excessive for the states likely to initially adopt this insurance requirement.  In most cases the limits for motor vehicles were adopted in the past and would be higher if set today.

[j] Worker’s compensation insurance usually relieves employers of other liability.  It is not the intention of defining benefits as Worker’s Compensation Equivalent Benefits include this limitation on gun owners responsibility.

[k] The Strict Liability in Section 5 is limited to places outside the Covered Persons home or business.  Negligent liability should apply everywhere as it not does.

[l] This gives the issuing agency time to invalidate the permit and take other enforcement action.

[m] A law enforcement officer who stops a person with a Covered Firearm will be able to check the card in order to take enforcement action.

[n] This language is intended to override any “Stand Your Ground” or other immunity law.  The limitation to places other than a home or place of business is to limit the strict liability to places where the permit is required.

The Need for State Regulated Gun Insurance with a Federal Mandate.

The answer to the question of whether we need to mandate gun insurance at the federal or the state level is to have the mandate at the federal level and the regulation of the insurance at a state level.  The special problems that guns have of illegally traveling across state lines to do their damage and of states varying so much in their willingness to regulate guns can be solved by this structure.  The federal mandate should implement the top-down process for continuing insurer responsibility advocated by this blog.  It should require that the insurance pay benefits to victims in accordance with the gun insurance requirement in the state where the shooting occurs.

One of the special difficulties that makes guns different than almost any other risk, is that move around from state to state so easily once they are in illegal hands.  Much of the country has a relatively small problem with illegal guns and people there see no need to make access difficult.  In other parts of the country, there is a major problem with death and injuries from illegal guns.  No matter how carefully places like New York, Chicago and Washington, DC work to stop the transfer of firearms to dangerous people they cannot control the flood of weapons that come in from areas with more permissive policies. The process has been named the Iron Pipeline.

This blog believes that requiring insurance is a practical way to deal with the problem.  Insurers that remain responsible for deaths and injuries from guns after they pass into illegal hands will set up conditions to prevent that passage.  They will find ways to do this that are minimal inconveniences to legitimate gun owners.  The question is how to get a requirement for such insurance into place in this environment.  The states that sell the most guns are least likely to make such a mandate.

Insurance in this country is normally regulated by the states.  The McCarran-Ferguson Act requires that if Congress wants to regulate insurance on a federal level, it must do so  explicitly.  The two major models for gun insurance, worker’s compensation and motor vehicles, are handled by the states.  It’s likely that gun insurance will also be state based but will require a federal mandate to make certain it is in place.  The certainty should come from a “top-down” requirement that makes a insurer retain responsibility for a particular gun until and unless responsibility is picked up by another insurer, regardless of any intervening events such as loss, theft or illegal sale.

The way to handle the need of some states for strong protection from the consequences of firearm injuries and of the desire of other states to put no expenses or limitation on the acquisition of firearms is to have the federal requirement specify that the benefits paid by the mandated insurance be set by the insurance requirement of the state in which the gun causes the injury.  If an insurer does not want to be exposed to the more generous requirements of some states then that insurer will take steps in the terms of the insurance to insure that the gun does not travel to those states.  For example, if Virginia has small benefits and New York State has generous benefits, then insurers will have an incentive to make sure that guns are not illegally sold to people who will take them to New York and sell them on the streets.

Once Congress is considering such a requirement the states will have an incentive to adopt a gun insurance requirement for guns sold in their own states in order to protect their citizens from illegal guns that come from outside their borders.