Life Insurance Now a Moot Point

In light of the recent trend in comics events (namely Blackest Night and Necrosha) it seems like no comic book character can stay dead. While this has always been true, now more than ever, the dead are suddenly seeming very lively.

Now, we've talked about insurance a lot in the past. Namely here, here, here, and oh yeah here. We like the topic. Mostly because an industry based on risk assessment in a world where aliens invade every Friday is too ludicrous not to talk about. And if there's one thing we like at Ecocomics, its ludicrous stuff.

But life insurance is another interesting point to deal with. Lets use someone as an example who seems like they're going to live a nice stable life. Let's say we use Jean Grey in the early 80s. So Jean has nice responsible parents who love her deeply. They don't want to think that its possible that their daughter could die, but like responsible adults, they need to plan for contingencies. Especially when their daughter is the kind of person who picks fights with the Living Monolith. So the Greys purchase a plan for their daughter. Then when she gets exposed to solar radiation, possessed by an alien life force, and blasted with a laser on the moon, it's time to collect on their policy.

The Greys then use the money from their daughter's life insurance policy to give their daughter a nice respectable funeral where all of her friends (including the blue elf creature, hairy canadian, and russian metal guy) and her laser blasting fiancee can mourn her properly.

And then the Fantastic Four finds Jean in a cocoon at the bottom of the Hudson River. What happens now? Has fraud been committed? Does the insurance company who paid out for Jean's death get their money back? If so, who pays them?

And this is the confusion that results from only one death. What happens when every mutant in Genosha comes back to life? What happens when every dead person in the universe comes back with a black lantern ring? Granted in both of these cases, people in insurance companies are likely too busy trying to keep the reanimated corpses from devouring their hearts to think about the finer points of this debate. But the debate remains. Theres a lot of folks re-animating and a lot of insurance claims which would seem to now be invalid.

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Question for Readers: How Can Superhumans Use the Market to their Advantage?

(The person who comments with most creative answer to this question will win a prize, which will be a comic book of his or her choice for under $20, assuming it is available at my local shop. Please note, we will not ship internationally).


Earlier, we discussed the notion of superhero externalities in our post about "reigning" in superheroes. Specifically, I had mentioned the following:

One involves the damage to public and personal property caused by super-battles, which we discuss at some length in our post about superhero insurance. Another is the constant violation of civil liberties. Often superheroes, such as Batman, will forcefully "coerce" criminals for information and will use sophisticated spy technology (see The Dark Knight film) to monitor suspicious citizens. A third involves the notion of escalation (this is particularly evident in Batman -- see Batman Begins, The Dark Knight Returns, Ego, the Killing Joke), whereby the mere existence of a superhero actually breeds more creative and dangerous supervillains.

However, superheroes and supervillains (and all metahumans) have the potential to do much more than this. In fact, there are many ways in which those with access to specific powers or technologies could take advantage of the the market and economy. Of course, many superheroes choose not to, viewing such acts as violations of their vows to uphold the law.

Nevertheless, it is generally regarded that as more metahumans turn up, there is a significant danger of having them abuse their powers. And not just in your standard, smash-and-bash, hold-em-up-for-ransom ways. Lex Luthor has often paid vast amounts of money to weaker metahumans in exchange for new, alien technology, which he would then use simultaneously to promote his villainous schemes and to profit his billion-dollar company, Lexcorp. In a recent Detective Comics storyline, Hush (though not a metahuman) used his surgical prowess to disguise himself as Bruce Wayne and siphon off millions of dollars from Wayne enterprises. In Garth Ennis' The Boys, superheroes are portrayed as careless automatons, who receive millions of dollars from comic book publishers and toy companies, as well as government pardons. All they have to do in exchange is occasionally save a hostage and support certain political candidates.

Here are some other ways that heroes, villains and metahumans could use the market to their advantage:

1) Insider Information. The superhuman community has access to a wealth of valuable information that is kept comfortably hidden from the general public. Every superhero in the Marvel universe is kept abreast of Reed Richard's latest gizmos or Dr. Strange's latest potions or Tony Stark's latest weapons upgrade. This goes on in the DC Universe as well. The Justice League watchtower contains technology that most humans could not even wrap their minds around. This includes technology that was given as gifts by the New Gods. Also, let's not forget Batman and his Brother Eye, an autonomous, global surveillance system that has the capability of watching over every superhuman on Earth.

Suppose that you were a recently admitted member of the Justice League (or of Checkmate) and had access to this technology, as well as, possibly, plans and schematics for constructing new, similar devices. Or suppose you took a call for a space battle and as a result gained access to an entirely new gadget that not even the Justice League had previously seen. You would stand to make a fortune from selling these plans to Earth companies, especially Lexcorp. This would ensure your termination from the League, but as we all know, fighting crime doesn't pay.

2) Insurance and Asymmetric Information. One of the biggest problems with market insurance systems is the notion of asymmetric information. Often those who take out individual insurance policies have access to information about themselves that insurance companies do not. If you are a heavy smoker, for instance, you pose a significant health risk that would warrant your insurance company to charge a higher premium. Of course, many people do not tell their insurance companies that they are smokers. Extrapolate this scenario for the superhero community. If you are someone like Spider-Man, who often gets injured in battles against supervillains, you are a risky candidate for insurance. However, to my knowledge, insurance companies in the Marvel Universe do not yet underwrite for superheroes. That is, there is no question on the insurance application that asks, "Are you a superhero, supervillain, metahuman, crime fighter, or vigilante of any kind?" As such, Peter Parker would likely be able to get away with utilizing more health care for a cheaper insurance premium.

I am sure that there are plenty of other ways that superhumans, heroes and villains could use the market to their advantage. I open it to the readers to name some others. Again, the most creative answer will win a prize.

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Lloyd's of Asgard

So far, we've discussed the issue of superhero/supernatural insurance as seen in the posts by the distinguished ShadowBanker here and here.

These posts got me thinking about insurance for superheroes. Not just insurance purchased by the public to protect against any damage caused by superheoes, but insurance purchased by the heroes themselves. Insurance firms in the real world have shown themselves willing to insure elements of an invidual such as the legs of a supermodel or a singer's voice. If these special abilities and attributes can be insured, why can't super powers?

This type of insurance would likely apply to those heroes who are not independently wealthy. If Tony Stark's armor is damaged, he has the money to repair it. But if the Punisher loses a prize shotgun or has his property crushed by an irate Russian man, how will he get a new one (especially since he has no discernable source of income)? It's up to superhero insurance to replace these tools and abilities, if possible. If the Flash loses his super-speed, the company which insures his power would be tasked with buying a rack of chemicals and getting said rack struck by lightning while Barry Allen stood next to it.

In my previously listed example a supermodel's legs contribute greatly to her livelihood. The model makes her money based on her looks and if those looks are damaged, her ability to earn money is greatly diminished. Hence the need for insurance. This is not necessarily true for superheroes. Most heroes do not derive their economic support from their powers or tools. However, the powers and super weapons do have intrinsic value for the protection of society. If Luke Cage loses his powers, there is a void in the protection of urban areas. The first goal of insurance should be to pay for an attempt to restore his powers. But if this is unsuccessful the company insuring Luke Cage's invulnerability could pay for youth centers and more police officers if Cage's powers disappear. This would be a good option in lieu of providing the money to Cage himself.

Another aspect of insuring superhero attributes and weapons would be to protect against any damage caused by them. This particular insurance could work a lot like car insurance. If your car damages another vehicle, the insurance you purchased for your car will be used to repair the damages to another individual's property. This type of coverage could be applied to the superhero world. If, for example, your mighty thunder hammer Mjolnir is used to destroy a children's hospital, the insurance you place on the hammer could be used to repair the damage up to a pre-arranged amount determined by the insurance companies.

The insurance could also protect against damaged caused by high-jacked superpowers. If the Mandarin takes control of your armor or Mimic steals your optic blasts, it would be reassuring to know that a financial institution had capital and established procedures to back you up.

Of course, there exists the question of who will pay the outrageously high premiums of items of such high value as Thor's hammer and Spider-Man's spider sense. These are items that, if placed in a Mastercard commercial, would likely fall under the category of "priceless." The cost could be partially underwritten by the government and the superhero him/herself. It's also possible that the hero could provide services of more traditional economic value (such as endorsing the company that insures them in advertising spots) in order to reimburse some of the company's investment.

Regardless, this method of insurance would center around the hero and not the environment that they interact with and could provide more focused insurance. But thoughts are welcome about how this system could work and whether it would even be feasible for any company to become involved with superhero insurance.

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Supernatural Disaster Insurance 2: Insurance Harder

Cover from Superman #677 by James Robinson and Renato Guedes. Cover by Alex Ross.

Thank you all for your wonderful comments on the earlier Supernatural Disaster Insurance post. As promised, here is the sequel, equipped with some of my views on the matter.

There were three systems I had proposed in the first post: a full public system, a public/private mix, and a solely market-based system.

The merits of the market-based system are that it would allow individuals to choose the insurance system that they feel is most appropriate for their situation. It would also minimize public taxes and curb any potential moral hazard problems. The problem here is that, first of all, it is likely that the low-income individuals would be boxed out of the system. With the frequency with which supernatural disasters occur in the comic book world, premiums would likely be very expensive -- especially in Metropolis, New York, etc. It is also generally regarded that the income disparities in cosmopolitan cities in the comic world world are considerable and only widening by the month. The poor in Gotham can barely afford food (one of the factors which contributes to the significant crime rate in the city). Hardly would they be able to afford insurance on their homes. And that means that if Two-Face blows it up, time to get a new home!

The other issue is that I think there are potential adverse selection problems. A commenter, Ajay, pointed out that this is unlikely to occur with the higher-income people since they tend to have more property and assets and hence more expected loss (and more reason to insure against those losses). This is a great point. But consider other factors. What about region? In a voluntary system, it is likely that individuals living in particularly dangerous neighborhoods will purchase insurance, especially if premiums are not underwritten. People living in neighborhoods that don't see many pumpkin bombs or batarangs on the other hand will likely opt out. And those populations are not insignificant. Superhero violence, though having the potential to occur at any given neighborhood, does tend to be localized. How many times has the Daily planet been destroyed? How many times has Spiderman fought around Times Square? Let's face it -- certain neighborhoods are like tractor beams for superviolence. Hence, those choosing to opt out of the insurance system, feeling they are generally safe from harm's way, will cause average premiums to skyrocket, will impose an extra cost burden on those that need insurance the most and will further shrink the market.

A public/private system is an interesting solution because it will enroll more of society's low-income populations. Considering a "catastrophic" mechanism, the lower-income populations would be able to insure against major damages to their their property. So if I were living in New York, I would feel safe knowing that my home is protected against any potential throwdowns between the Green Goblin and Spiderman. If, however, I live in a neighborhood where lots of cars get blown up by pumpkin bombs, I might consider some supplementary insurance for the cheaper stuff. Again, though, unless there is a mandate, I think you would likely see similar adverse selection problems.

I think the solution that makes most sense is for the government to cover all costs imposed by supernatural disasters. The public would pay higher taxes, which would go towards a fund to cover these sorts of damages. You might argue that this could engender a moral hazard problem, as pointed out by commenter, Carl. I doubt this would be a huge problem. I don't see what kind of insurance fraud anyone is willing to commit that would pit them against the Joker. There are potential lives at stake with supernatural disasters. I don't think that the people of Metropolis would start flocking towards highly concentrated super-active areas simply because they know the government will pay for their toaster.

I tend to view this government spending as not all that dissimilar from national defense and security spending. For the most part, superheroes are government-approved (with exception of vigilantes like Batman). Consider the case of Superman. The Metropolis government, law enforcement agencies, and public have no problem allowing him to take residence in the city in exchange for their protection. It is a contract between him, the public and the government: Superman has free reign to conduct his business against evil-doers, while the police turn their heads barring any significant indiscretions. In exchange, the city is protected under the Man of Steel's umbrella. The cost of this security is the cost that the public pays towards repairing the negative externalities (destruction).

Now if only we had some way of curbing the destruction caused by Superheroes. Perhaps we do.

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Supernatural Disaster Insurance

Suppose you own the car that's being blown up in this image. You park, run into the convenience store across the street for some batteries, and then some right-wing armored militia blasts everything in its way as it frantically tries to kill Captain America with rocket launchers. No more car. Now what?

In an earlier post, Mark mentioned that the construction industry in the comic book world must account for a large portion of the economy. I bet there is also a lucrative superhero / supernatural disaster insurance industry to deal with these externalities.

How would this insurance industry be set up and organized in the comic book world? Certainly no one is chasing after Superman asking him to pay each time the Daily Planet globe is decapitated from the building. So who is paying? I think there are several options for how a system of insurance in the comic book world could work:

1) A comprehensive, public system. If this government pays for all the damages, then this would effectively be equivalent to having no insurance at all. Instead, the government would levy extremely high taxes from the general public ($18 billion per person per year by Mark's count) and use them to cover all the costs of supernatural disasters.

2) A mixed public/private system. Such a system could be organized any number of ways, but I think two in particular make the most sense. One could be a system similar to obtaining catastrophic insurance (or high-deductible health insurance plans), but in this case it would be paid for by the government. So the government would only pay for certain services, such as for damage caused by superheroes of supervillains to your home, and would only pay "catastrophic" expenses--those that exceed a certain predetermined amount in costs. Everything else would be paid for out-of-pocket by the homeowner. The other way is to establish a base government benefit for certain services (i.e. superhero destruction, supervillain destruction, destruction to your home, destruction to your car, etc.) up to a certain amount. Beyond this base benefit, individuals can elect to purchase supplementary insurance to cover services not included in the package.

3) Market-Based System. This would work exactly like insurance markets work on real Earth. Multiple insurance companies would compete, offer coverage for different services related to superhumans, and charge premiums for that coverage. Likely there would be some significant administrative costs, since most coverage would probably be purchased at the individual level. Furthermore, premiums would be rated by region. That is, if an individual lives in a particularly active area of Metropolis or Keystone City, superhero insurance premiums would be much higher than they would for someone living in Kansas, where there is no action unless Darkseid takes over the entire world (but seriously, how rare is that?)

I will post my views on which system is the best later, but for now I'd love to get reader opinions: Which system makes the most sense in the comic book world? Is insurance necessary at all? A few things to keep in mind:

1) If a public/private system were put into place, should insurance be mandated? If not, then how would they prevent the richer individuals from opting out of the system, thereby increasing average premiums and shrinking the market?
2) Are there any measures that can be taken to minimize the amount of superhero destruction?
3) Should premiums be rated any other way than just by region?
4) What should be included in the base benefit?

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