23A048 Insurance in a Free Society by Jim Davies, 11/28/2023

Once a Zero Government Society (ZGS) is established there will of course be no government regulations to dictate what contracts you and I are allowed to make or not make; for there will be no government. How will this affect the insurance trade?

Edward Lloyd was the 1652 equivalent of Howard Schultz, who bought Starbucks and grew it into a household name. His string of coffee shops included one beside the Thames in London, where businessmen, ship-owners and bankers were wont to meet and enjoy the beverage. They considered how to defray the devastating costs involved in the loss of a ship to rocks and tempests.

Such sinkings could happen to the soundest of ships and the most diligent of skippers, because it was to be another 100 years before John Harrison developed a chronometer reliable enough to provide accurate readings of longitude. So, no navigator ever knew exactly where he was. Given storm and fog and rocky coasts. that was too often fatal. The coffee drinkers came up with a fix.

It was to invite ship owners to pay a small periodic fee (a "premium") into a fund, that would be used to compensate any of them who lost a ship; and of course to yield a profit to the fund operators. The risk was shared, but without compulsion.

That's insurance. The risk is low but unavoidable and the loss is heavy.

It wasn't long before the idea caught on, and got extended to a wide range of other risks - all of which corresponded to that pattern: a loss that was unlikely but heavy and a risk that's hard to avoid. Accidental death: life insurance. Home catches fire: fire insurance. A tree leaps into the road and hits your car: auto insurance. And so on.

My father spent his working life with an insurance company which provided just that kind of service to cover just that kind of risk. So I've no beef with the trade.

Notice: "health" insurance doesn't fit the pattern. The risk of getting ill is high; everyone gets sick sometimes. The loss may be high, but is usually low (a visit to the doctor's office.) And while it's hard to avoid, there is a gradation; those taking care to stay fit suffer that loss markedly less than those who don't. The only kind that does fit the pattern is the unexpected rare event of a catastrophic loss; bones broken in an accident, arrival of a plague, etc. For those, insurance can be a good protection - provided the insurance firm survives; in a true plague, unlike the bogus one of 2020, it may not.

But not for everyday health expenses; they are a waste of money because nearly all premium payers will make claims and the insurer will take care to make a profit. Yet that's the kind with which we are burdened, today in America (and pretty well everywhere else in the First World) due to government intrusion. The great fable that began it all in 1940s Britain was the Labour Party promise of "free health care!" Ha. I've yet to meet a physician or nurse or lab techie or laundry operator who does not like to get paid. And since the State never has any resources it does not steal, the bill is necessarily footed by the patients as customers; minus the cost of government administration.

"Health insurance" is therefore ill-conceived and badly named; to the extent that it's insurance at all, it's compelled by law, so excluding choice. The same is true of some other classes of insurance, such as business and auto liability policies. Once all that political interference disappears, I expect the insurance industry to survive and prosper, with a business model similar to what prevailed when I was learning to walk, just as Mr Lloyd and his patrons visualized and produced.

Krime Insurance will, I think, also be a popular feature of the coming ZGS, for it fits the pattern well. There will not be much krime at all, because everyone will have embraced the Self Ownership Axiom and therefore will respect the persons and properties of everyone else; but when it does happen and the perp declines to appear in a free market court for restitution to be ordered, detection and a hunt may be required. The victim will be able to insure against that nuisance; policies will provide recompense at once, and the insurer will take over the case, hunting and obtaining redress. Here's betting that the first such firm will call itself "Holmes & Watson."