Gun Insurance as Gun Control

I have a some more substantive posts on guns and gun control brewing, but this struck me as an interesting quick topic. Megan McArdle has an interesting post up where she discusses the merits (and demerits) of the idea being bandied about that gun owners be required to pay for liability insurance on their guns. The idea is that this would allow insurance companies to effectively price the deadliness of various types of guns into the price of the insurance, and that people would thus be deterred from buying more deadly guns without having to actually ban any guns.

Megan is highly skeptical of the idea. She points out a number of practical problems, notable the question of how you would get people most likely to misuse guns (criminals) to pay insurance premiums in the first place. Even if you could extract one premium at the time that a gun was first legally purchased, the owner could then stop paying.

I'm not sure this is actually the biggest practical obstacle (let me just say now I'm against the proposal, but I'm looking at it's plausibility because I think that it helps dissect some of the illusions that gun control advocates are under.) You could require that any time a gun is sold that the buyer undergo an insurance check and pay a one time insurance fee which would cover liability if that gun were used to kill anyone any time in the next 10 years. Sure, guns can sit around a long time, but it would take a lot of pre-planning to buy a gun more than ten years before committing a crime. This would probably the cover the majority of guns that undergo a legal sale prior to being used in a crime.

Of course, a lot of guns used in crimes aren't purchased legally or are never traced. If not traced, there's obviously no way to assign liability. If it was bought legally by one or more people within the last ten years, then you could make the most recent insurance company pay out.

There are currently about 300 million guns in private hands in the US. There are about 12,000 people who are killed with guns each year (obviously it wouldn't make sense to pay out for suicides as it would allow one to provide for one's family by committing suicide.) That means the chance that any one gun will be used to kill someone in a given year is 1 in 25,000. In ten years, that's a 1 in 2,500 chance. If we assume a payout of $1million to anyone killed with a gun, the average cost of ten years of liability insurance would be $400. Once you take into account the fact that often murder weapons aren't recovered, insurance companies would come up with a (probably lower) figure based on the characteristics of the buyer and the gun which would quantify the actual chance of liability with any given gun.

Now, $400 is a fair amount of money, but for ten years coverage it's honestly not very much. Moreover, I suspect that the result of applying actuarial probabilities would not be what the advocates of this idea expect.

Proponent John Wasic writes:

When you buy a car, your insurer underwrites the risk according to your age, driving/arrest/ticket record, type of car, amount of use and other factors. A teenage driver behind the wheel of a Porsche is going to pay a lot more than a 50-year-old house wife. A driver with DUI convictions may not get insurance at all. Like vehicles, you should be required to have a policy before you even applied for a gun permit. Every seller would have to follow this rule before making a transaction.

This is where social economics goes beyond theory. Those most at risk to commit a gun crime would be known to the actuaries doing the research for insurers. They would be underwritten according to age, mental health, place of residence, credit/bankruptcy record and marital status. Keep in mind that insurance companies have mountains of data and know how to use it to price policies, or in industry parlance, to reduce the risk/loss ratio.

Who pays the least for gun insurance would be least likely to commit a crime with it. An 80-year-old married woman in Fort Lauderdale would get a great rate. A 20-year-old in inner-city Chicago wouldn’t be able to afford it. A 32-year-old man with a record of drunk driving and domestic violence would have a similar problem.
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Want to buy a single-shot World War II rifle? You’d pay much less than a semi-automatic handgun with a multi-round clip.

I'm certainly willing to bet that my bolt action WW2 rifles would have a very low statistical chance of being used in a crime. (Come to that, so would my semi-automatic WW2 era M1 Garand.) But here's the thing: The AR-15 "assault weapon" which was used at Newton is also a gun that is very seldom used in crimes. Sure, they're occasionally used in very spectacular crimes, but given that AR platform rifles are some of the highest selling rifles in the US, the ratio of people killed to number available is actually quite low. Further, the upper middle class middle aged woman who bought the AR-15 used at Newton would probably show as a very low risk profile. I'd be surprised if such a law would have tacked on more than one or two hundred dollar to the price of the gun -- and that's on a gun that already costs $700+.

The guns that would be most impacted by a law like this would be relatively inexpensive handguns. The last data I saw listed .38 Special revolvers as the most frequently used for crimes in the US. Also, cheap models are far more often used than expensive ones. The result of such a law would simply be to raise the price of less expensive (often, less "scary" from the point of view of gun control advocates) guns while leaving many of the ones that scare people most (so called "assault weapons") untouched. Cheap semi-auto pistols would become more expensive while the much derided Glock would not be impacted as much. As when it comes to profiling gun owners as opposed to weapons, let's be clear: The main thing would would be done by such a regime would be making it much harder for young male minorities living in poor neighborhoods to buy guns. That might be effective in a certain sense, but if advocates of such a law want to ban gun ownership by Black and Hispanic men, maybe they should just admit it.