What is InsurⒶnce? An Idea Described using Legacy Money

Agorawide is on our side.

[Originally posted on Reddit with some updates for clarity, using Legacy Money for readers unfamiliar with ξ.]

What is InsurⒶnce? Disaster protection without profit. When you raise the money in advance everyone can better plan their responses to disaster. When you do it after the fact you’re hoping for a collective handout and may not get the help you need. Whenever you see insurⒶnce, we’re talking about protection managed by a collective without a profit incentive, as opposed to plain insurance that exists for profit.

How many people you got?

So, you’ve got a collection of anarchists who are sizable enough to support insurⒶnce—let’s say that there are 450 people. If you have more people, you’ve got more ability to cover more incidents, but more on that later.

Defining the Coverage

First everyone’s got to define what they’re protecting. Let’s say that this insurⒶnce collective is protection from auto repair bills. Everyone decides that the average bill is $1500. If your repair bill is more expensive, you’re paying for it, but then you didn’t have to pay for the first $1500 on it. (As an aside, this has a nice side effect of putting a downward pressure on prices instead of the current deductable system most capitalist insurance uses, that is, you pay the first $500 or $1000 and then the insurance pays the rest, encouraging prices to go up and everyone else to be hit up for more money in higher rates.)

Funding

First everyone’s got to define what they’re protecting. Let’s say that this insurance collective is protection from auto repair bills. Everyone decides that the average bill is $1500, so the group agrees to fund protection for two incidents. That’s about $7 per person. I think you can go without a couple of breakfast burritos to chip in $7. Either everyone keeps the $7 themselves at the ready (making payouts take longer) or they can choose an insurer to hold the money at the ready for claims. Whenever someone makes claims, every two incidents will require another $7 from you. You could certainly pay in advance to avoid the nag.

As people who subscribe to the coverage use incidents, everyone else submits new payments into the system as needed.  If 450 people really do have 3-5 accidents a month as opposed to 2 a month, the payments naturally will need to be larger to support the demand for incidents.  If everyone avoids having accidents, then everyone pays less for insurance—no need to adjust your monthly rate which never seems to change much with traditional insurance systems.

Claims

How easy it is to make a claim is another parameter of the coverage. Since it is essentially, everyones money, when you make a claim, you’re going to need to tell everyone that you need the money—but telling everyone about the claim going to eventually overwhelm everyone with requests. One idea is a randomized consensus subset. To make a claim, randomly select 1% of the group covered (in this case, 5 people out of 450, three approving at the minimum) who approve or disapprove it. They’ve got to do it fast or another 1% will be selected and the people who didn’t respond in the original set lose half an incident’s coverage—this is incentive to be prompt with service. Claims are published somewhere for everyone to review and also perhaps could be a limited form of advertising or reviewing for mechanics who do the repair work. (That is, would you want to alienate 449 people because you screwed over 1? I don’t think so.)

Encourage Partial Claims

So you didn’t need all $1500 to fix your car. What happens to the remaining money? For example, say it was $500, leaving $1000 in coverage unused. Recycle it back into the system by only deducting a partial incident or 1/3rd of an incident. Now we all pony up $2.31 instead of another $7.

Transparency

The books are open. Everyone knows who’s made claims and everyone knows who’s been doing the work.

Education

Shit yeah, you need that oil change. If you’re not an expert in preventive car maintenance by being a member of this InsurⒶnce plan, we’re doing it wrong.

Summary

No one profits from misfortune here, and no one is compelled to purchase this insurⒶnce by the state. The randomization of claims processing with a social penalty for non-response (If you don’t even approve or disapprove a claim you’re penalized) and social penalties for mechanics doing bad work or service provides a pretty good incentive for good behavior by all.

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3 thoughts on “What is InsurⒶnce? An Idea Described using Legacy Money

  1. Interesting — can you do a slightly-revised version for broader (and not just libertarian) audiences? It could be the first page under a new group self-insurance/mutual insurance category, in the “Resilient Things” section of our new community resilience wiki – http://MiiU.org.

    • Certainly. From current feedback from lots of another anarchist-leaning people there are a lot of misunderstandings about it, so it needs some other work before I attempt that:

      1. People think that they pay $7 once and only get two incidents of coverage—it’s not magical like that, like regular insurance you will have to keep paying this “premium” to continue coverage. Because claims are public, everyone knows who made the claim and who performed the service. With many eyes, fraud can easily be seen. For good mechanics, a lot of business can be directed their way from the collective.
      2. Bad behavior is assumed when the participants are anonymous. Of course this is a certainty to happen. In a resilient community however, people aren’t anonymous, they are flesh and blood living in front of you.
      3. People are assuming that they’ll always take the maximum claim. This is going on the record, and people and mechanics who always take the maximum without proof of need are going to find themselves unable to get future claims approved.
      4. And people often say that they have a repair bill > $1500 that won’t be covered. This is true, but the insurance as it was defined never said it would cover it. If you need more coverage, you need different insurance. 🙂

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