#4 Insurance Reduction

Risk management is one of those modern terms, like Peacekeeper Missiles and Fat-Free Ice Cream, that refers to something very real, something legitimate and accepted by our modern world, and something that becomes slightly absurd when viewed from a wider context. We live in a dangerous world, but not as dangerous as the one we are paying for. Basically, I think we need to grow a pair.

Global insurance premiums totaled close to $4.1 trillion in 2007, up 3.3% (2008 figures aren’t available yet, though they will likely show less growth, due to the world’s financial markets sinking into the sea). The United States accounts for 30% of that, with premiums totaling $1.23 trillion, or about $4,087 dollars per head. For all of these statistics on global insurance, as well as others, click here.

I have philosophical and economic objections to insurance. Philosophical first: fear begets insurance, and insurance begets fear. Insurance premiums are just one of the many prices people decide to pay so they won’t be afraid of the world around them. The fact is we are unbelievably more safe, by every measurable standard, than even our very recent ancestors. Violent crime has plummeted, health care is better than ever, as are cars, planes, and public transport. Yet why are we paying more each year for insurance, instead of less? Why is the amount we pay to feel safe in inverse proportion to the risk we are actually in? And why, with all of the financial and physical condoms we wrap on ourselves, do we not feel safer?

I’m reminded of those lengthy public health assemblies for children about Halloween, in which they were repeatedly reminded to NEVER accept candy from strangers. It may contain razors, it may contain drugs, there may be alien symbiotes living in the Mars Bars. These types of assemblies, along with a media firestorm of coverage about “candy poisoners” created enormous amounts of fear among parents and communities at large. In 1985 a poll found 60% of parents feared their children would be harmed by tampered candy. As recently as 2004 there were fire departments and hospitals offering to x-ray candy received. Despite all of that...there are no instances of random poisonings through Halloween candy. None. Read here if you doubt. But facts cease to matter. The fear is what sticks. We are told we “can never be too careful”. I don’t think whoever wrote that lived in our time.

Economically speaking, insurance has been shown to be a tool that helps those who least need helping and often hinders actual work being done. People who are poor, unhealthy, or for that matter, black, have a much harder time getting insurance than they would if they lived on the other side of the Redline. Yet these people need it most. Likewise, people living truly adventurous and courageous lives often can not be insured, because their behavior is deemed too risky. And some of our most skilled professionals cannot afford to work in some areas due to the ridiculously high costs of malpractice insurance.

But the insurance companies are not necessarily to blame for all of this (they absolutely are with health insurance, but that is a future entry). They are providing a needed service. My aim is to eradicate the need. This leads me to my solutions: drastic limitations on litigation in this country, and increased personal and media responsibility.

I am a huge proponent of tort reform. There were 15 million lawsuits filed last year in this country. Unfortunately, I think one of the most needed steps is one of the most unachievable: elimination of juries in many civil actions. Unnecessarily huge payouts and a less than balanced perspective are just two of the problems that arise when you give twelve laymen and women control of huge amounts of money. Unfortunately, that would probably require a constitutional amendment. On the more doable scale, I would like to see legislation that makes it more common for a plaintiff to be required to cover the defendant’s legal fees if the suit is dismissed. This would greatly reduce the financial fear of litigation, and hopefully lower the total amount of frivolous lawsuits.

Beyond that, personal responsibility cannot be legislated. But it can be taught. It is your right to bring a lawsuit against someone. But it is not your duty. Nobody needs to file a suit seeking punitive emotional damages after a car accident. But still it happens often. Though it often seems like an urban myth, a jury really did award Stella Liebeck $2.7 million dollars for burning herself with coffee. These lawsuits raise premiums, encourage profit-seeking litigators, but worst of all, they make companies and people justly afraid of idiots with lawyers and microphones. Through a decrease in litigation and an upsurge in oldschool responsibility, insurance might be able to be curtailed to areas where we actually need it, and out of the fat-free peacekeeping.