Dr. Steven A Leibo is the Sage Colleges Professor of International History & Politics
“Gambling on Insurance”
I suppose you one should not admit this on the radio but I am something of an addict. No on not drugs , I suppose being in college in the sixties probably soured me on that stuff. And as for booze, well, I am one of those people who falls asleep after the second beer. It is sort of hard to get addicted under those circumstances.
No, it’s gambling I am really into. Oh not the Las Vegas sort. For me Vegas style gambling is really boring and I don’t find New Jersey’s version any more interesting. No, the gambling I really like is the Connecticut kind.
Yes, Hartford, Connecticut style gambling, you know the city that bills itself as the insurance capital of the world. Now that’s my kind of gambling And I really am addicted. I mean it’s cool, I put down a bet, a wager that my car will get into a wreck, that I will get sick, that all my stuff will get stolen. And the house, the house of Hartford takes the bet. Right, it’s not called a bet, it’s called something else, uh a right a premium. What’s the difference? Spelling!
And the house…. of Hartford is of course is betting that I’ll stay relatively well, that my car will be safe and my stuff not stolen. Sometimes they win, sometimes I win. And I get more piece of mind than most of the folks I have seen staring glassy eyed at the one armed bandits in Vegas.
Oh I know the house of Hartford almost always wins. I know that they have those have those super mathematicians, folks probably even smarter than those math geniuses that can beat the odds at Vegas. The folks that make sure all that gambling always favors the house the house of Hartford.
But now I am starting to get worried because Insurance companies are after all the greatest risk assessors in our economy. And Insurance companies know how to protect themselves. They were after all the ones who pushed for all those building fire and earthquake codes. That is what they do, assess risk and protect their profits, and a good many of those companies, Not all of them, but the best of them are starting to understand the numbers are changing.
That our obsessive burning of fossil fuels is changing the global climate, making it more risky for them to insure our homes, and they are starting to act., doing what the industry calls “Defensive Underwriting” over pricing, withdrawing from particularly vulnerable areas, like Florida where they have fled so dramatically the state government of Florida has become the biggest insurance company.
Indeed while I was writing this, word just came down that federal flood insurance rates would be going up. Yes the insurance industry is starting to get it, starting to understand that climate change is affecting growing seasons, putting the plants that exacerbate for example asthma on steroids. Pushing health care costs up. They know that weather disasters in this country are up four fold in recent years but what really scares me is that insurance is one of the bedrock inventions of modern life. That tool we almost all use to smooth out all those bad things life throws at us.
But insurance only works if life is predictable enough for all those geniuses in the industry to come up with numbers that work for them. That can offer us an affordable premium and still allows them to make a profit when the claims come in. Without that predictability a bedrock of our society, the insurance industry can topple.
Would a bank lend you money on house and assume you will keep paying it for decades unless they could also insure it?
To be blunt insurance is the key enabler of the entire US economy and that industry is built on predictability, While we are moving into an era of climate instability by not pushing faster toward the renewable green energy sources That will allow all of us to withdraw from the biggest addiction of them all climate crashing fossil fuels