Too important not to try

by Peter Kochenburger10 Sep 2015
MASS MURDERS and gun violence understandably ignite a firestorm of attention from the media, legislators and the public, along with a search for solutions. One recurring proposal – using insurance to reduce gun violence – appears so fraught with obstacles that it seems unworkable, but the stakes are too high to rule it out.

After the December 2012 shootings at Sandy Hook Elementary School in Newtown, Conn., legislation was fi led in at least seven states to mandate liability insurance for gun owners. None passed. Similar legislation was introduced in Congress this past May with House Resolution 2546. There may be new initiatives in response to the most recent mass shooting at Emanuel African Methodist Episcopal Church in Charleston, S.C.

The motivation behind these efforts should be familiar: to enlist liability insurance and insurers to help combat gun violence. Proponents argue that when engaged, the insurance industry will have the financial incentive to research and improve firearm safety; to utilize risk-based pricing in assessing, accepting (or rejecting) and pricing risk for individual gun owners; to create private market incentives for safe storage and use; and to compensate gun violence victims.

In other words, supporters believe that insurers can play a powerful role in reducing gun violence, just as they have successfully contributed to the design and use of safer cars, homes and other products they insure. Representative Carolyn Maloney of New York, the primary sponsor of House Resolution 2546, made this reasoning explicit in her introductory remarks before Congress, referencing the “power of insurance markets” to determine and allocate risks and to encourage responsible gun ownership through lower premiums, “just as with car insurance.”

This bill likely will go nowhere and, as with earlier e  orts, will be subject to both criticism and ridicule. Yet gun violence is too pervasive, and the potential to reduce deaths and injuries from firearms too important, to blithely dismiss these e  orts.

There are two major problems. The first is the nature of gun violence. In 2013, almost 98% of firearm deaths were from suicide (63.8%) or homicide (33.9%), and only 1.5% was classified as accidental, according to the Centers for Disease Control and Prevention.

Liability insurance is rarely triggered by a suicide, and only occasionally by a homicide, which means that the vast majority of fi rearm deaths may not be covered. To leverage insurers’ ability to reduce and mitigate loss, they must have a financial risk at stake. This can be addressed, though doing so will likely make insurers unhappy.

The states and the federal government have the legal authority to require insurers to cover firearm injuries or deaths caused by a policyholder, even if the shooting was intentional.

This is not a radical – or even new – proposition. Insurance has long covered certain illegal acts when required by law, or when market demand and sufficient underwriting certainty exist to develop a profitable insurance product. For example, drunk driving is a serious criminal offense, yet it is rarely – if ever – excluded in personal auto policies, because public policy places victim compensation over the alleged moral hazard of insuring an illegal act.

While requiring coverage for all shootings will not address suicides, underwriting liability insurance would create incentives reducing the risk, such as mandating gun safes or fingerprint recognition, making it hard for a family member to access a gun without permission.

The second problem?  Shooters who don’t have insurance. Those most likely to shoot and injure others are unlikely to carry homeowner’s or renter’s insurance – the products most likely to contain fi rearm coverage – and even more unlikely to care that it would be against the law to own a gun without liability insurance. This is a major issue, but estimates of its scope may be based more on guesswork and assumptions than on hard data.

We do not have enough information to reject or to champion insurance as a tool to significantly reduce gun violence. However, its potential benefits, and the power of the private sector in addressing similar issues, are considerable. We need more rational discussion and evaluation, rather than blind opposition or naïve support.