Posted on 29 Jan 2013 by Neilson
While some states are considering mandatory liability insurance for firearms owners, insurers and various industry sources are skeptical about the viability of the idea in the insurance market and its ability to achieve the intent of improving firearm safety.
In the wake of the Newtown, Conn., shootings of 20 students and staff at Sandy Hook Elementary School, states such as Massachusetts and Connecticut have already offered legislation that would make firearm insurance mandatory, although details are to be worked out.
The Massachusetts bill, proposed by Rep. David Linsky, a Democrat, is written to provide those injured or the survivors of those killed through negligence legal recourse and perhaps to allow insurers selling policies to charge rates using a risk-based system as a means of improving firearm safety. Linsky said his bill might result in insurers pricing gun liability insurance according to risk, including factors such as how many guns are owned in the home, how those weapons are stored, and whether they are kept in a locked area.
The Connecticut bill, proposed by Democratic Rep. Bob Godfrey, is a preliminary version that simply requires both current and future firearms owners to maintain liability insurance and that a 50% sales tax on ammunition sold at sites other than firing and shooting ranges be imposed. Godfrey said while the events in Newtown are coloring much of the activity in gun control, the intent behind his bill is to ensure that gun owners can have some coverage in instances where their weapon was subsequently used by others in a way that resulted in an injury.
Both Godfrey and Linsky envision the bills leading to improvement in gun safety in much the same manner driving habits improved following the introduction of mandatory automobile insurance. Godfrey said in researching the bill, his staff looked at auto insurance as a potential model.
But officials within the insurance industry are less than certain that such bills will actually fulfill their intentions.
David Snyder, vice president of international policy at the Property Casualty Insurers Association of America, said the Massachusetts bill and others like it are well-meaning, but hard to make work in the desired fashion. As a public policy matter, liability insurance is ineffective and ultimately proves to be unpopular. It becomes unpopular because the people who are required to buy it feel they don't have a choice, he said. Those who support gun liability insurance find they unintentionally trigger a chain of events that only enrich middlemen while fail to address the social aim of the bill.
Robert Hartwig, president and economist at the Insurance Information Institute, was skeptical of gun insurance legislation because he was uncertain an actual market for it exists. In recent years, Illinois lawmakers failed to pass a bill that would have required a $1 million liability policy for every gun owner. One of the criticisms leveled against the bill, was that no market existed for the insurance, he said.
There is a market for accidental, unintentional injuries in homeowners' policies, but coverage for intentional and illegal acts is excluded, he said, noting said that in accidental shootings, the person who was injured always maintains the right to sue.
It's easier to write such laws than to actually put them into practice, Hartwig said, noting no liability insurance market exists for private gun owners and one would have to be created. From there, other questions arise. If there is not sufficient capacity in the private market, is the state of Massachusetts willing to become a big insurer of weapons? Enforcing such a law would be a huge challenge for insurers, who would be faced with policing such bills. How do you know people are filling out their applications truthfully?
Auto insurance is easier for insurers to gauge despite filing inaccuracies because insurers know about the safety mechanisms built into vehicles. Insurers would have no way of verifying that those seeking gun insurance actually have gun lockers at home and that trigger locks are activated, Hartwig said. You don't really have much data on this to start up a market, he said. There is no practical means for verifying this at this point in time.
Insurers would have to determine how they define rating factors. For instance, they could be based on personal experience, or use of public records to determine the numbers of shootings in a given ZIP code, Hartwig said, questioning whether states would regulate gun insurance rates and whether insurers would be able to charge appropriate rates.
State Farm spokeswoman Anna Bryant said her company was aware of and reviewing the Massachusetts legislation, but is refusing to take a position on the bill. State Farm officials, she said, remain uncertain of what the final bill will contain.
Godfrey views his bill and others like it as a relatively new idea. To date, he has not talked the bill over with insurers. I'm looking forward to that part, he said. Hartford's still the insurance capital of the world.
The motives behind the bills were laudable and PCI does not question them, Snyder added. But unfortunately, the reality indicates that the hoped-for results don't really occur, he said. It would be better to focus attention on other areas.
Currently, only a small fraction of firearms licenses are denied, according to data from the Federal Bureau of Investigation. In 2011, the FBI's National Instant Criminal Background Check System processed 16.45 million background checks on purchasers, resulting in just 78,211 denials. Since its inception in 1998, the NICS has processed more than 140.8 million transactions and denied just shy of 900,000.
The top five writers of homeowners' multiperil insurance in Connecticut in 2011 were Liberty Mutual Insurance Cos., with an 11.89% market share; Travelers Group, with 11.39%; Chubb Group of Insurance Cos., with 10.40%; Allstate Insurance Group, with 8.94%; and State Farm Group, with 4.93%, according to BestLink.
The top five writers of homeowners' multi-peril insurance in Massachusetts during 2011 were Mapfre North America Group, with 11.88%; Liberty Mutual Insurance Cos., with 9.97%; Arbella Insurance Group, with 7.07%; Chubb Group of Insurance Cos., with 6.55%; and Travelers Group, with 6.48%.