Re: AltInst: Legislation insurance

From: Robin Hanson <>
Date: Thu Apr 30 1998 - 12:07:45 PDT

George O'Brien writes:
>It is certainly true that you can insure for just about anything. It is
>also true that most of the time it is not economical to do so for vaguely
>defined risks.
>In my role as coordinator for the Phoenix St. Patrick's Day Faire, we were
>faced with the issue of dealing with being totally rained out. We could
>have purchased "rain" insurance to cover our losses.
>The problem was that the cost of the insurance would have been a high
>proportion of our total risk (the lost revenues).

Your problem doesn't seem to be regarding how well defined your risk was.
Rather, it was the small size of your risk compared to the substantial
administrative and underwriting overheads in standard insurance practice.
If some alternative ways to offer insurance were legalized, these costs
could dramatically fall.

>Political insurance would be even worse. Every possible contingency would
>have to be covered to ensure a payout. Even when it has been covered,
>there is still the problem of collecting on insurance when the nature of
>the risk is problematic such as with changes in legislation. Once taken to
>court, there is always the concern that collection would be twarted by the
>notion that collecting would contravene public policy.

Insurance does not have to cover every possible contingency to be valuable.
And the policy contract can be made elsewhere on the planet, where courts
won't much care about local public policy.

Robin Hanson
RWJF Health Policy Scholar, Sch. of Public Health 510-643-1884
140 Warren Hall, UC Berkeley, CA 94720-7360 FAX: 510-643-8614

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Received on Thu Apr 30 12:28:38 1998

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