Insurance for me, but not for thee:

Sometime ago, we noted the Bush administration's cavalier attitude towards extending unemployment insurance for about 800,000 people. They took a hands-off approach. We read:

Congress adjourned its 107th session Friday, sending President Bush a homeland security bill but faltering in a last-ditch effort to help recession victims whose unemployment insurance is about to run out.

... House Democratic leader Richard Gephardt of Missouri and Senate Democratic leader Tom Daschle of South Dakota asked President Bush to weigh in and press House Republicans to approve the Senate proposal. The White House insisted that Congress work it out.

And the Bush administration has also promoted "privatization" or "partial privatization" of the Social Security Insurance program. But let's make this point clear: You cannot "privatize" insurance. It's a contradiction in terms. If you privatize insurance, you're really dismantling it.

So, it looks as if the administration disdains insurance. It's everybody for himself. Sink or swim. No collective action to hedge against misfortune - right?

Not so fast!

Bush is in favor of insurance for businesses. That's why he pushed for the just-signed Terrorism Risk Insurance Act. Not only does it make terrorism available, it makes it mandatory that it be available: (from the NYTimes)

The legislation, which Mr. Bush had made a top priority, requires all commercial insurers to begin immediately offering terrorism coverage.

But there's more. The government is a partner with this program:

The bill also shields the insurance companies from the kind of astronomical losses that another attack like that of Sept. 11 could bring.

Under the bill, formally known as the Terrorism Risk Insurance Act, the government will pay 90 percent of the cost of a terrorist attack after losses are greater than $10 billion. For lesser damages during the first year of the program, the insurance companies will pay up to the equivalent of 7 percent of their premiums toward damages with the government picking up the rest of the costs. In the third year, the insurers will be required to pay up to 15 percent of their premiums with the 90 percent share for the government kicking in at $15 billion in losses.

There is no mention of a Terrorism Insurance Trust Fund, so we presume such a thing won't exist. That means if there's a big attack, some of the compensation will be paid out of general funds - i.e. by all of us. It's quite a contrast: No interest in paying unemployment insurance out of a trust fund that has $25 billion in it, yet enthusiasm for an unfunded terrorism insurance program for businesses.

Let us say at this point that we think insurance is rational and worthwhile. It is, historically speaking, an idea that's been useful to society for about 400 years. However, for reasons unknown, some on the right howl that insurance for people (unemployment, retirement) is a variant of socialism (which it isn't). Yet they cheer insurance for businesses.

posted by Quiddity at 11/26/2002 01:49:00 PM