Should Gun Owners Have To Buy Liability Insurance?

Jan 31, 2013
Originally published on January 31, 2013 8:42 am

Note: We originally published a version of this post a few weeks ago. We are republishing it now to coincide with our story airing today on Morning Edition.

All kinds of proposals to reduce gun violence have been floated recently. One idea that has gotten the attention of economists is liability insurance. Most states require car owners to have liability insurance to cover damages their vehicles cause to others; some economists think we should require the same of gun owners.

We reached out to a few economists to get their thoughts.

Justin Wolfers, professor of economics and public policy at the University of Michigan, wrote:

The real problem with gun ownership is that they involve "externalities," which is economist-speak for the fact that your gun may be used to hurt others. For instance, when Nancy Lanza purchased her Bushmaster AR-15, she probably weighed the benefits of owning the gun — the joy of ownership — with the price (about $800). But it's unlikely she considered the loss, pain and grief that might follow if it were used by her son to kill 26 innocents. When people fail to consider the broader social costs of choices like buying a gun, they're more likely to do them, and society suffers.

The economic answer is simple: Make potential gun owners take account of these potential social costs. One way to do this would be to charge an annual license fee for each gun you keep. Research by economists Phil Cook and Jens Ludwig suggests that the typical social cost of one more gun-owning household is somewhere between $100 and $1,800 per year. While that's a wide range, if we set a gun ownership license fee this high, it would force gun owners to face the true social costs of their choices, which would lead many fewer to buy guns.

Another even more powerful approach is to recognize that the problem isn't guns per se, but gun violence. Thus, instead of taxing guns, we should tax gun violence. Basically, this is the same as saying that we should make gun owners liable for any damage their guns do. Not only would this discourage some people from buying guns, it would lead those who do keep guns to be more careful with how they're stored. Indeed, greater care would surely have kept Adam Lanza out of his mother's cache. The problem, though, is that Nancy Lanza is neither with us to pay the damages her gun caused, nor could she afford to pay for the enormous damage her gun wrought in Newtown. And so the only way this solution works is if guns required mandatory liability insurance, much as we force car owners to buy insurance for the damage their machines wreak.

It's the sort of careful solution that would enable people who enjoy hunting to continue with their passions, but also push them to take the sorts of precautions that we all wish the Lanza household had taken. If the gun lobby were smart, and if they really are interested in being socially responsible while keeping their weapons, they would be pushing hard for this sort of policy.

Next, Russ Roberts, a research fellow at the Hoover Institution and host of EconTalk:

Is it a good idea to require gun owners to purchase liability insurance that would cover damages caused by the guns they own? In the wake of the Newtown tragedy, such policies seem like nothing more than common sense. The cost of the insurance would deter some from owning guns or at least from owning an arsenal, as the cost of insurance would presumably rise with the size of one's collection. And there is a certain logic to requiring insurance. When a person purchases a gun, she may not consider the possible harm that might come to others from the eventual use of the gun. Adding the cost of insurance might make the purchaser bear the full cost of the gun in the future, which could easily exceed the purchase itself. After all, registering a car requires insurance on the grounds that cars can cause involuntary harm to others. The insurance forces the driver to bear those costs that might come to pass that are borne by others in an accident.

But the logic is not quite as neat as it might appear. Many people already buy and own guns illegally without license or registration. Adding the cost of insurance would further discourage honest gun ownership. That would make matters worse, not better. And is it so obvious that all guns are harmful to others and that gun ownership should be made more expensive to every owner? When an honest, law-abiding citizen uses a gun in self-defense, it often protects those nearby who are unarmed. Perhaps gun ownership should be subsidized for honest people. I don't think this is a good idea, but raising the cost of gun ownership, particularly for good and honest people who are likely to use a gun only in self-defense, is not a free lunch.

What is really behind the call for liability insurance is the natural urge to make it harder for people to own guns. Such a law might do some good if it made dishonest and violent people less likely to own guns. But liability insurance makes gun ownership more expensive for honest, law-abiding people while encouraging dishonest and dangerous people to own guns in ways we cannot see.

And, Robert Frank, professor of economics at Cornell University:

Gun ownership, even in the hands of responsible people, increases the risk of death and serious injury to others. In cases involving multiple deaths, few gun owners could afford to compensate victims' families for their losses, just as most automobile owners couldn't afford to compensate the families of accident victims. With automobiles, we require all vehicle owners to carry liability insurance. A similar approach would help with firearms.

Nothing in the constitution grants people the right to expose others to serious risk without compensation. Insurance sellers are skillful at estimating the risks posed by drivers with specific characteristics, and we could expect them to be similarly skillful at assessing the risks posed by gun owners. Requiring liability insurance isn't a total solution to the problem of excessive risk, either for autos or for guns. But in both cases, it's a positive step.

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Of the many ideas for new gun laws, one proposal captures the interest of economists: liability insurance.


Most states require car owners to have liability insurance to cover damage their vehicles caused others.

INSKEEP: And some economists think gun owners should have to do the same.

Here's Caitlin Kenney from NPR's Planet Money team.

CAITLIN KENNEY, BYLINE: When you want to purchase car insurance, you have to answer questions like this...

JACOB BAUM: Is this the first time you're getting a car? How many years have you been driving? In the past five years, how many accidents or violations?

KENNEY: Jacob Baum sells auto insurance at Choice Insurance Agency in Brooklyn, New York. He asks these questions to help insurers figure out how likely it is your car will be involved in an accident - not just you as the driver, your car.

BAUM: Besides yourself, who lives with you, regardless of their age?

KENNEY: Now, imagine we ask gun owners these same questions.

JUSTIN WOLFERS: How old are you? What's your gender? What type of gun is this? Are there teenagers in the house?

KENNEY: Justin Wolfers is a professor of economics and public policy at the University of Michigan, and this is what he wants. He wants people like Jacob Baum to be asking these same questions of gun owners, to be selling them liability insurance based on their answers.

WOLFERS: We know that cars kill people. And so we have strong liability insurance requirements for cars. We also know guns kill - in the United States - literally tens of thousands of people a year. It seems like it's creating enormous social harm, and we're asking you to pay for it.

KENNEY: Wolfers say requiring insurance wouldn't just provide compensation for families of gun violence victims. It would help keep guns out of the hands of people we don't want to have them. Insurance agents would be able to identify risky gun owners just like they identify risky drivers. And those people could be denied insurance or have to pay really high rates for it. Not only that, responsible gun owners would get a discount for taking extra precautions with their guns, just like drivers who have good driving records can get cheaper insurance rates.

WOLFERS: Insurance companies would look at someone who is a responsible hunter, who used a gun lock, kept their guns stored separately from where they had their ammunition, had it locked away. They'd probably charge them much, much lower premiums than they would, for instance, a young hot-head who stored their gun near their bed.

KENNEY: In theory, Wolfers says, a law like this could keep guns out of the hands of bad people, while motivating good people to be extra safe.

RUSS ROBERTS: And that's true in theory, but in practice, it doesn't work that way, because people don't necessarily comply with the law.

KENNEY: Russ Roberts is an economist and a research fellow at Stanford University's Hoover Institute. He says the major flaw with this idea: criminals. If you're already a lawbreaker, why would you follow this law?

ROBERTS: They're not going to register it. They're not going to license it, and they're not going to buy that insurance. They're going to buy the gun on the black market. So the money won't be there to compensate the victims, as nice as that would be, but more importantly, there's no discouragement or deterrence for those folks from the existence of that policy.

KENNEY: Even with cars, this is a problem. The Insurance Research Council says one in seven drivers is not insured. And liability insurance for cars is pretty strictly enforced. It would be a lot harder to ensure that gun owners have insurance. You know if someone's driving a car. You don't know if they're carrying a gun. And sending law enforcement to people's homes to check for guns and gun insurance would almost certainly face legal challenges. Caitlin Kenney, NPR News. Transcript provided by NPR, Copyright NPR.