Misunderstanding how insurance works

It’s pretty bad when a practicing attorney is far, far off the mark in how insurance works. So time to revisit firearm liability “insurance”, something this attorney has apparently been advocating for over 20 years.

Article: https://www.yahoo.com/news/gun-safety-mandatory-arms-insurance-193610382.html

So first of all, here’s one thing to get out of the way: insurance will not cover an insured where intentional acts are involved. It will only cover you where there is negligence or it results from someone else’s actions. Intentionally burn down your own house, for example, and your homeowner’s insurance will basically tell you that you’re on your own. Intentionally crash your own car and your auto insurance will say the same.

Intentionally take your own life and your life insurance policy is void. (Except in physician-assisted suicide, in States where that is allowed.)

And since the vast majority of firearms injuries and deaths result from the intentional actions of the person pulling the trigger, that makes that whole discussion entirely moot. Which makes it utterly baffling that a practicing attorney, of all people, would be advocating for an insurance policy that covers someone’s intentional actions.

Insurance has never worked that way!

So this leaves unintentional actions. And generally where someone’s unintentional actions lead to the death or injury of another person, it is the result of either negligence or ignorance of the person taking the actions, or a malfunction or failure of whatever they are using that led to such.

And injuries and deaths caused by a firearm are strict liability torts and crimes under the law in pretty much every State. This means intent is largely immaterial unless there was an unforeseeable malfunction of the firearm. And even that might not save you since a malfunction of a firearm leading to the death or injury of someone else violates the cardinal rules of handling firearms.

One other detail that’ll be very relevant later: virtually all instances where a firearm discharge results in injury, let alone death, are felonies. And, to reiterate, they are strict liability crimes as well, meaning being unintentional won’t save you from criminal charges. And that is true in every State. And convicted felons are prohibited persons with regard to firearm ownership under the laws of every State and the Federal government.

Okay, so let’s get into his article.

Mandatory insurance makes people be responsible for choices that impose risks on others. We must require gun owners at any instant (maker, seller or buyer) have liability insurance to cover any harms that weapon causes.

Liability insurance pays out only when someone is liable for a loss. As such, including the “maker” and “seller” in the list means they, and probably everyone else along the chain of ownership, should be held liable for every firearm homicide and suicide. Yeah… no. That’s like holding Fiat and State Line Jeep here in Kansas City liable if I get into a car accident that kills the other driver.

But, again, liability insurance doesn’t cover the intentional actions of the person carrying the insurance. So this would only pay out in a very small minority of all firearm-related injuries and deaths.

The insurance will be from a private firm, not the government. Each insurer will seek to earn more premiums with fewer claims.

Apparently he’s never heard of the insurance loss ratio. That is the ratio of money that is paid on claims versus revenue from premiums. And that loss ratio is dictated by government regulation.

So if the government mandates a loss ratio of, for example, 80%, that means for every $5 in premiums, $4 must be paid to claims. If an insurer finds themselves lax on claims and awash in cash with a topped-up reserve, then they must refund money back to their customers (either directly or as credits against future premiums) in order to maintain their loss ratio. They can’t just keep that money.

It’s why auto insurers were issuing refunds or credits in 2020. And dental insurers as well, and probably vision insurers, too.

As such, insurance companies actually do NOT have an incentive to “earn more premiums with fewer claims” since they won’t be able to keep that money. Their profit margins are effectively capped by government regulation. The only way they can increase their profit is reducing their operating costs. Contrary to popular belief, health insurance companies in the US aren’t making money hand over fist.

Insurance payouts would go to the crime victims’ compensation fund, whenever a crime involving guns is committed or a gun mishap occurs.

Why not pay the victims directly? Why put the money into a fund where there is a statutory cap on how much crime victims can get? Here in Kansas, that cap is $25,000, $5,000 for funeral expenses. And that amount is reduced if you receive compensation from other sources. Such as insurance!

So you’re requiring insurance presumably for payouts to crime victims, many of whom will likely not be able to benefit from it due to having other forms of insurance that will cover the losses and other expenses. So this isn’t about helping crime victims, but putting another financial barrier in front of gun owners.

Or, rather, white gun owners. More on that later.

Rates will vary according to the gun we want to insure, our expertise, and claims history.

So ban “assault weapons” and require a certain level of training without actually going through the legislative process. Gotcha!

In a way, this could actually end up backfiring on gun control advocates calling for “liability insurance”. Because it’ll show what is already readily apparent from the FBI statistics: so-called “assault weapons” aren’t the problem they make them out to be. Any “claims history” would show this.

Instead pistols are the firearm of choice for gun crimes and suicides. But police also carry pistols, but I’m sure we’ll exempt them from this whole thing per usual.

But the “claims history” is basically about making “insured” gun owners pay for the actions of the uninsured. Since we all know that the gangs, mafias, and cartels aren’t going to go along with buying this “insurance”.

And it also puts another legal and financial barrier in the way of the lower class and minorities from exercising a CONSTITUTIONAL RIGHT. It’s another example of a white person in their ivory tower mistakenly thinking that white gun owners are the problem, and so coming up with a policy proposal that will disproportionately affect Latinos and blacks, making it – say it with me! – RACIST.

Quoting an article on the idea of liability insurance I wrote back in 2015:

Gun owners are not just white people living in well-off areas. Yet many of the policy ideas seem to think this is their assumption. When you make it more expensive to exercise a right, those who are lesser-off will be less likely to exercise their right. That’s exactly how poll taxes used to work, yet because we’re talking about guns, no one is seeing it the same way.

Yeah I went there again. It’s impossible to not whenever someone proposes a financial barrier of any kind to the exercise of a right.

Since, again, much of the policy ideas that white gun control advocates conjure seem to think that all gun owners are just well-off white people, benefiting from white privilege and so having a comfortable enough existence that they can afford to give up some more money to own their guns. When in actuality gun owners are a very diverse group of people, and only became more so in 2020 and 2021.

The whole idea of “firearm liability insurance” is pushing the cost of gun crimes onto all gun owners rather than onto the people committing those crimes. And while the push-back might be “we push the cost of all car accidents onto all car owners through insurance”, you’re again missing the intent factor if you present such an argument. Since the vast majority of vehicle collisions are unintentional whereas the vast majority of firearm injuries and deaths are clearly intentional.

Now that’s not to say there isn’t any role for insurance with regard to firearm crimes. But it’s a role they already take: covering the victims. Property and business insurance, for example, covers the victims of crimes. Health insurance (or property or business insurance, where applicable) covers any injuries requiring medical attention. Then the insurance companies may try to go after the perpetrators for whatever they can get to make up that loss, to the extent they’re allowed by law.

And as already noted, those already covered by other forms of insurance will see reduced or eliminated liability for reimbursements from their State’s crime victim compensation fund.

I understand the push for this kind of thing as well: it’s to make victims of crime (or their survivors) as whole as possible. But the main flaw in any call for “liability insurance” is simply that you’re talking about an insurance payout for someone’s intentional actions. And regulations in most (if not all) States – e.g. California – specifically preclude the ability for insurers to cover intentional actions.

But even if the regulations or statutes were updated to eliminate that preclusion, you’re still talking about a financial barrier to the exercise of a constitutional right. The equivalent of a “poll tax”, so to speak. And once you start including intentional actions under the umbrella of insurable events, the cost of such insurance will skyrocket. Since, again, those who are actually committing gun crimes aren’t going to buy the insurance, leaving the cost of those crimes on those who are willing and able to.

And that’s the point.

It’s similar to all the calls for per-round taxes on ammunition and additional taxes on firearms: make it financially infeasible to exercise a constitutional right.