Gun Insurance Would Not Be Expensive

                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):

The average bodily injury claim for 2011 had a severity of $14,848  Even though the size of a claim for a death is likely to be higher than for injury, there are about 2.5 Million injury claims per year for only about 32,000 fatalities ,some of which are commercial or don’t result in insurance claims.  This allows us to assume that  for automobiles the overall severity is very near the severity for non-fatal injuries.

Net premiums written Liability                                          $100,371 Million

Net premiums written Collision/Comprehensive              $62,956 Million

Incurred Losses for Liability for 2011                                  $64,293 Million

Incurred Losses for physical damage for 2011                   $40,592 Million

Combining these gives us a ratio of losses to premiums of 64.2%

The National Center for Injury Prevention and Control is part of the Center for Disease Control and reports statistics on Fatal and Non-Fatal injuries. 

Overall Firearm Gunshot Nonfatal Injuries for 2010          73,883

Total Number of Firearm Deaths in 2010                             31,672

Estimates of the number of guns are harder to find as various laws have restricted the government from doing studies, collecting data or publishing statistics.  In July 1995 the Bureau of Justice Statistics estimated that there were about 233 Million guns available to the general public in The US in “Selected Findings.”  This publication has been taken down but is available at archive.org.  Private estimates for today are a bit larger, perhaps 270 Million.

Now for the calculations:

In order to make an estimate of the cost of a future insurance program the first step is to estimate the total amount of the claims that would be made.

 If we assume that the average cost of an non-fatal injury from a firearm is not more than twice the cost of a automobile injury, The 73,883 non-fatal injuries would have insurance claims of average severity of up to about $30,000 and could result in a total insurance claims cost of $2,216 Million per year

 Then, if we have a program that covers every death and has a death benefit of $200,000 that would be a loss amount of that number times the 31,672 deaths or $6,334 Million per year.

This gives a total claims amount of $8,551 Million per year.  If the same loss ratio is applied to gun insurance as to automobile insurance, the premiums would total $13,315 Million per year.  Dividing by the lower estimate of 233 million guns, this gives an estimated average premium of $57.15 per year per gun.  This number is probably low because of minimum administrative costs and is only an average.  The actual rates that will be determined by the market will vary greatly based on the risks in various situations.  The overall cost is low enough not to be a barrier to implementation of a good and universal insurance system.

Why would gun insurance be so much cheaper than automobile liability insurance even though it would cover claims regardless of fault and has more generous benefits?  The big reason is that there are about 2.5 Million non-fatal injury claims for automobiles compared to only about 74,000 non-fatal injuries reported for firearms.  Injuries not deaths are the big cost in the case of automobiles.  Another factor is that the smaller claim volume is divided by a very large number of guns.

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