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.

John Wasik Calls for Gun Insurance Again.

In a new article published Sept. 20, 2013 on the Forbes website and titled “Five Reasons Why Gun Insurance Can Survive Political Indifference”, he advocated for insurance as the most effective and practical solution to gun violence in more detail than ever before.  Wasik is a pioneer in pointing out the need for gun insurance starting well before the tragic incident at Sandy Hook.  His prior articles include:

February 15, 2011 in Reuters: “Why gun insurance should be mandatory

December 17, 2012:  “Newtown’s New Reality: Using Liability Insurance to Reduce Gun Deaths

December 29, 2012: “Gun Liability Insurance: Still a Viable Proposal

April 4, 2013: “Gun Insurance: An Economic Argument

His five reasons are:

1. Liability Coverage Addresses the Issue of Potential Future Harm Better than Any Gun-Control Legislation.

Wasik says the liability laws evaluate harm well and insurers will have an incentive to pressure gun owners for safety.  He does not mention no-fault principles which would be needed for effective general coverage.

2. Liability insurance should be required of all sellers and manufacturers.

He points out the importance of their responsibilities in selling and distributing guns.  He alludes to but does not explicitly state that their responsibility might continue to guns that were improperly sold and not insured by purchasers.  This chain of continuing responsibility is the core of this blogs advocacy for getting insurance in place to cover all gun injuries.

3. Liability Insurance is good business.

Wasik points out that the additional business should be welcomed by insurers and agents.  He does not point out that the insurance industry adamantly opposes any mandates for insurance in any area.  As this blog has often stated, this is because insurers think that mandates will bring regulation and especially regulation of prices.

4. Insurance is an accepted economic vehicle that’s been around for more than 200 years.

This is certainly true. Over that long time every new form of risk that has appeared has resulted in innovative solutions from the insurance industry.  Guns are the only important activity that has a substantial danger unaddressed by insurers.

5. The social costs are staggering and insurance can cover some of them.

Wasik mentions the medical costs which are only a part of what insurance should cover.  Worker’s Compensation and some Motor Vehicle insurance covers many economic damages—loss of work and support of dependents.  Even with these costs spreading them of the the huge number of guns to be covered would make insurance affordable.  The existence of an insurance requirement would reduce the number of incidents through it effects on safety and reduce the cost further.  It would also reduce the even greater costs of gun violence that are spread throughout society rather than concentrated on victims of shootings.  Costs such as reduction of property value, avoidance of activity through fear and the cost of protective measures.

John Wasik recognizes that dealing with guns is a difficult task for our society and will take a long time, but that insurance is one of the best tools we have.

A Progression of Kinds of Insurance for Guns

The purpose of having insurance for victims of gun violence is to provide money for the many needs they have after they suffer from a shooting. The insurance should be structured to pay in the various situations that occur, for the various needs that are faced and in a timely manner. There are lots of kinds of insurance in use today and several ones will be examined in the chapters that follow. Starting with the most basic insurance designed only to protect the buyer of the insurance, we will add features until we see that it is possible to create a system that works to provide the needed protection. We’ll start with the simplest in the progression.

Simple Liability Insurance

Simple liability insurance is the kind of insurance that a gun owner would buy voluntarily to protect himself or herself. If the gun owner is sued by a victim, the insurer is obligated to defend the gun owner in court. It’s necessary for the victim to prove fault on the part of the gun owner. The degree of blamelessness required on the part of the victim varies. If there are terms in the policy excluding coverage because of any situation of action by the gun owner, they will prevent recovery even if they are very arbitrary. The insurance company will probably fight tooth and nail to blame the victim, deny responsibility or get out of having to pay by any means available. If it looks like the victim will win the suit than there may be an offer of settlement and if the victim does win the money to pay will be available. This is a considerably better situation than trying to sue a gun owner or user who does not have any money. The existence of insurance is usually a major part of getting legal representation for an injured person without the victim having to prepay an attorney.

Liability Insurance for Paying to Victims

When insurance is mandated or otherwise designed to protect victims, then it should work differently. The victim in effect becomes an additional insured. It’s still necessary to show that the gun owner was at fault in the incident, but other acts by the insurance purchaser usually don’t prevent payment. The most important is that reasonable system for compelling insurance will pay if the gun and insurance owner intentionally do the shooting. In addition, the mandate should restrict the arbitrary exclusions that could become a barrier. The insurer normally pays directly to the victim. This is the way that the required motor vehicle insurance works in most states that do not have no-fault systems.

No-Fault Insurance

As its name implies, no-fault insurance does not depend on negligence or other fault on the part of the shooter. It pays to the victim on the basis of the losses and injuries received. In the case of motor vehicles, most no fault has an injured person collect first from their own insurance. This makes since because most of the time there are either two cars involved or the driver or a passenger of the one car is the injured person. But for situations where a car hits a pedestrian, the driver’s or the car owner’s insurance is the one to pay. This is the way it would work for guns. It should be clear that there is no problem with requiring the insurance to pay for intentional or criminal shooting on the part of the gun owner. One serious problem remains, the gun may be in the hands of someone other than a responsible owner who can be required to have insurance.

Insurance Guaranteed to Follow the Gun

If no-fault insurance as described above is mandated and it applies to particular guns rather than guns in the hands of an insured person, there is a cure for the uninsured gun problem. The insurance can stay in effect after the gun is diverted, lost or stolen as long as necessary. Various calls in state legislatures do this directly until the loss is reported to police, but the rule can be that the only way an insurer relinquishes responsibility for a gun is to have a new insurer take it up. Of course, insurers would take steps to guarantee that a gun owner does not lose control of a gun without getting that new insurer in place. This would also eliminate the need for the government mandating the insurance to follow up or track guns and owners directly. It would only need to track the insurers.

The last form of insurance is the one needed to provide for the broad array of victims of shootings.

Hearing Held on DC Gun Insurance Bill

On Thursday May 16, 2013 the District of Columbia held a hearing on the B20-170, Firearm Insurance Amendment Act of 2013 their Gun Insurance Bill.  The first panel consisted of Dan Gross, President of the Brady Campaign; Erin Collins from NAMIC; Tom Harvey, Gun Insurance Blog and Kris Hammond, Resident of DC.

The hearing was taped and the video is available here.  Written testimony from Dan Gross, Kris Hammond and Chester A. McPherson is here.  News coverage generally ignored the supporters of the bill.  For example see the Washington Post Story.

After preliminary remarks by Committee Chair Vincent Orange and Councilmember Mary M.Cheh (the bill sponsor) the first to present was Dan Gross who gave a good presentation in support of the bill outlining the seriousness of gun violence in the US.  He gave an example illustrating that current insurance does not apply even to many accidents, if it is available at all.  He stated that “it is absolutely unfair to saddle innocent victims with all the costs.

Erin Collins gave a presentation of the industries opposition to mandating insurance for guns.  It stated that this insurance was unnecessary and impractical and repeated that it couldn’t cover intentional acts.

Tom Harvey for this blog gave an oral version of the written statement below but added examples to counter the statement by MS Collins that insurance couldn’t cover intentional acts. Continue reading

Firearm Suicide in DC

This blogger has been researching statistics for presentation to the District of Columbia City Council in relation to their bill B20-170 to require insurance for guns.  Some of the figures are striking.  Firearm homicide for DC over the 10 year period 2001-2010 is over 5 times the national average but firearm suicide is one third of its national average.  This means there are over 15 times as many suicides per homicide nationally than in DC.  Part of this difference is no doubt demographic.  Suicide rates vary dramatically by race, age and gender.  But the non-firearm suicide rate per 100,000 persons in DC is 75% of the national average and the firearm suicide rate is only 32% of the national average.  That difference is probably due to the scarcity of guns in DC even with the large illegal gun problem. If this difference had not existed then there would have been an additional 142 firearm suicides in DC during the 10 year period.

It’s fair to conclude that DC’s strict firearm laws are saving about 14 lives a year from suicide, but would an insurance requirement have a substantial part of this effect in places where firearms are common.  Suicide researchers generally think that most suicides are impulsive and that substitution of means is uncommon.  This is an area where removal of the restrictions on firearm data gathering and research is very much needed.  Insurers requirements for safe storage can make a large difference.  Many informed public health experts believe that even things as small as separate storage of ammunition and keeping guns unloaded will make a substantial difference.  A person who keeps his gun at a range or shooting club rather than at home in order to get a lower insurance rate is far less likely to take an impulsive but irreversible and tragic action with it.

The figures in the table all concern deaths by firearm unless otherwise labeled.  They are totals for the period 2001-2010 and are taken from the CDC’s WISQARS system.  Rates are per 100,000 population and are not age-adjusted.

Intent DC US DC Rate US Rate
All Intents 1,453 306,946 25.18 10.21
Accidents 16 6,739 0.23 0.23
Suicide 109 175,221 1.89 5.79
Homicide 1,311 119,246 22.72 4.01
Legal Intervention 13 3,325 0.32 0.11
         
Accidents/Homicides 0.012 0.057 0.010 0.057
Suicides/Homicides 0.083 1.469 0.083 1.444
         
All Suicide Firearm or Not 352 338,043 6.1 11.38
Non Firearm Suicide 243 162,822 4.21 5.59

Looking at PCI Statement on Gun Insurance to Connecticut Legislature

The insurance industry through its trade group spokespersons has been very negative on the possibilities of dealing with the gun violence problem by means of requiring insurance. The legislative proposals made so far have all been very narrow calls for conventional liability insurance sometimes with high limits. The trade groups have been quick to jump on the limitations of that approach and on projected difficulties with implementation. The quotes in various new articles have been very hostile to gun (and actually all) insurance.

In a statement made to the Connecticut State Legislature on March 19, 2013 the Property Casualty Insurers Association of America (PCI) made a more carefully worded opposition to such insurance. This allows an analysis of the reasons for the reservations of the insurance industry on this matter.

PCI opposes this legislation because it will be ineffective in curbing gun violence and will create significant burdens for law abiding gun owners and insurers. As a general rule, PCI opposes mandating the purchase of liability insurance. We have found that mandatory insurance requirements are often ineffective and serve only to add enforcement and administrative costs for both government entities and insurers.

The comparison with motor vehicle insurance is relevant here in showing that this is a ridiculous statement. While it varies greatly from state to state, in many states motor vehicle insurance is mandatory, enforced and highly effective in compensating injured persons. In states where it is not effective, it is because insufficient insurance is mandated or enforced.

Continue reading

DC Bill on Gun Insurance B20-170 Hearing

The bill in the District of Columbia Council, B20-170, requiring insurance for guns will have a hearing at 10AM on May 16, 2013.  The text of the bill requires liability insurance of $250,000 for gun owners.  It provides for willful acts.

(b) The insurance policy required under subsection (a) of this section shall specifically cover any damages resulting from negligent acts, or willful acts that are not undertaken in self-defense, involving the use of the insured firearm while it is owned by the policy holder.

The announcement of the hearing provides for written statements until May 30, 2013.

PreventingNewtown Blog Points Out Gun Insurance Benefits

A new post by Julia Hartman on the PreventingNewtown blog titled “A Case for Gun Liability Insurance” gives a thoughtful and interesting discussion of the benefits of requiring insurance to protect victims of gun violence.

The post gives a moving presentation of the damage done daily by guns and calls for insurance as a way to deal with the problem.  It makes the comparison to motor vehicles and points out the fact that gun deaths exceed motor vehicle deaths in 10 states currently.  Suicides are handled on a par with homicides and accidents, an position which is often opposed by those supporting the status quo for gun policy.

Continue reading

New Analysis on Guns, Insurance and the Second Amendment by Lund and Gilles.

A paper “Mandatory Liability Insurance for Firearm Owners: Design Choices and Second Amendment Limits” has been published by Nelson Lund of the George Mason U. School of Law and by Stephen G. Gilles of the Quinnipiac University School of law. While there have been simple calls for requiring gun insurance and comparisons of guns and cars at various times, Nelson Lund’s paper of 25 years ago “The Second Amendment, Political Liberty, and the Right to Self-Preservation” in the Alabama Law Review is the only serious and significant source known to this blog to address the issue prior to the Sandy Hook incident. The title of the new paper fairly describes its focus. Many issues of interest to those who want to think about the possibilities of using insurance to protect the public and compensate shooting victims are raised.

The authors of the paper are among those who believe that the Second Amendment gives individuals wide gun rights and that the narrow findings of the Heller decision only start to describe the limits of governmental regulation in this area. Others believe that Heller was the product of a momentary and ideological combination of justices which will not be expanded and will eventually fade in importance or even be overturned. The paper takes the view that, even under the broad interpretation of the Second Amendment, mandated insurance may have a role in containing gun violence. It does, however, see that role as being much more limited than does the author of this blog.

While this blog does not consider the Second Amendment as a major barrier to implementing effective gun insurance, many others do. This new academic analysis by widely respected conservative philosophers and thinkers is very valuable in laying out the nature of that objection. The paper should be read and considered carefully by anyone who is serious about understanding the possible role of insurance in dealing with America’s gun violence problem.

Continue reading

North Carolina Added to States with Gun Insurance Bills

A bill HB976 has been introduced in the North Carolina Legislature.  It has several gun control provisions including $100,000 in mandatory gun liability insurance.  This insurance goes farther than in most other states by applying to willful acts and to unreported stolen guns.  The bill introduced by Rep’s Luebke, Insko, Harrison and Adams has 7 sponsors so far.  It was introduced on 4/17/13, showing that momentum to deal with gun violence is continuing and that insurance is seen as a part of the solution.  There have now been bills introduced in 9 states and the US House.