Fine Article on Gun Insurance by Megan McArdle in The Daily Beast

Megan McArdle has written a long piece in The Daily Beast entitled “Should People Be Forced to Buy Liability Insurance for their Guns?” It is by far the most detailed and thought out analysis of the suggestion that I have seen since Newtown. While I don’t agree with her conclusion that the problems make insurance as a solution unworkable, she gives logical reasons that need to be addressed.

She starts with three reasons that we would want insurance. The first is to price guns off the market which I agree is unfair. The second is to pay those who are harmed by guns. That’s the usual function of insurance and I think it would work here. It should be the core of the design of the system. McArdle argues that most of the death is suicides and I agree that it’s problematical to pay without a fairly long delay. But the standard two year delay in life insurance is there to protect insurance companies more than to prevent suicides. Anyway much of what the insurance covers should be for persons injured but not killed.

Most of the non-suicide deaths and the injuries are intentional shootings. McArdle argues that criminal actors would not buy insurance. As we have very few clandestine gun factories in this country, most guns start out as legal ones. Her argument shows that lost or stolen guns need to continue to be covered by the previous owners insurance. Anyway, there are a significant number of shootings that are intended as self-defense but injure people who turn out to be innocent.

The third reason given for insurance is to create a system that has insurance companies be ‘quasi-regulators.’ McArdle doesn’t comment on that but it’s common in other kinds of insurance. The loss prevention departments of insurance companies do a lot of inspecting and improving of businesses.

A series of problems are listed

Problem Number One: The Insurance Laws Are Highly Political

    You betcha! But we entering into a period where we will examine this problem so major action for solution may become possible.

Problem Number Two: Criminals Don’t Buy Insurance

    McArdle describes how those who have gun illegally certainly won’t be signing up to pay. Obviously true but it just shows that much of the point is to make sure that guns don’t change hands illegally by loss, theft or some kind of voluntary transfer. We will have to have an insurance system that follows the gun in that case and leaves the insurance company on the hook. If that’s in place, no doubt the insurers will have rules to make the guns stay in the proper hands.

Problem Number Three: Non-Criminals Aren’t Usually Held Liable for Criminal Activity by Others

    In explaining this problem, she mostly points to straw purchasers who would buy guns and let the insurance lapse. This would be a real problem if the insurance company is then out of the picture. The system that is developed will have to have extended responsibility for insurance companies in that situation. This would give the insurers an incentive to require financial and other responsibility from anyone purchasing insurance from them. It would probably put the straw purchasers out of business.

Problem Number Four: Insurance Often Excludes Criminal Behavior by the Policyholder

    That would have to change. This insurance would be to compensate the injured; it’s not just to protect the insurance holder like current liability insurance.

Problem Number Five: Holding Original Insurers Liable Might Destroy the Insurance Market

    McArdle describes the history of asbestos liability insurance where an Insurance Market was destroyed by a requirement that insurers be responsible for old exposures. That was a very different situation than this one. Most important with asbestos the companies were made to be responsible for losses in the past where there was no one left to pay. They wouldn’t do that so the market failed. In this situation Original insurers would be responsible only for future losses. They would be priced in as they are in many other kinds of insurance today. As for the price, it will be scaled by the amount of losses. The average price will only be huge if the number of death and injuries grows. Extra risky insurance purchasers will pay more.

Problem Number Six: A Ban by Any Other Name is Still Just as Difficult to Achieve

    She right on this in that it shouldn’t be a ban in disguise. The system needs to work for responsible gun owners. It will be necessary to design a system that fits the situation.

Problem Number Seven: Liability and Insurance Law is Mostly Handled by the States

    She points out that it’s likely that this will be handled on a state by state basis. She’s right that some states would be willing and others would resist, but the situation isn’t very different than of car insurance. Car insurance works pretty well even though it’s quite different in different states. Limits vary dramatically. Nothing about this would be nearly as hard to mesh as some states being No-Fault and some regular Liability in their car insurance.

Problem Number Eight: Mass Shooters Won’t Be Deterred

    McArdle argues that mass shooters would still exist unless we use this to eliminate guns. That may be true but the Insurance companies’ controls on illegal transfers may help some here. Anyway mass shooters are only a part of the problem with gun deaths and injuries

Problem Number Nine: Liability Insurance is Usually Required for Public, Not Private, Uses

    She points that car insurance is required only for use not ownership of motor vehicles. I would think that it might be possible to skip insurance on weapons locked up in secure and highly regulated storage facilities.

McArdle lists a lot of problems which are real and require discussion. My arguments above oppose her arguments in her article so that, if we are both considered together, there will be discussion of both sides of the questions. I believe that, even though this is a difficult and complex issue, there are solutions to the problems which will lead to a workable way to use required insurance to reduce and compensate for gun injuries. We use insurance for almost every other major risk, it’s just done differently in each kind of situation.

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