10 thoughts on “Tort Insurance for Immigrants? for Everyone?”

1. Just two months ago Robin Hanson wrote a post entitled Reuire Legal Liability Insurance, i.e. for everyone.

   As a thought experiment it is quite stimulating and fertile, but of course completely incompatible with anything like the current state of the American legal system. For starters, in the liability systems lives are worth different amounts of money in a way which is (theoretically) rationally related to age, income, etc. Following through the implications immediately hits some major road-blocks with prevailing social norms.

   Most popular rationalizations of the nature our present state of affairs assert that the judgment-proof nature of the average defendant and the unworkability of any tort model for us is precisely the justification for the contemporary criminal justice system, though I can already hear David Friedman yelling about the many historical counterexamples in “legal systems very different from our own.”

   You would also need some way besides fines to punish judgment-proof people who didn’t comply with the mandate to purchase insurance in the first place.

   But the major social problem of uncompensated harms and negative externalities associated with certain human behaviors is basically a third rail around which it would be useful to have an abstract way to carry on a discussion. For instance, it would be possible, without getting into taboo specifics, to discuss the impact of ‘Tiebout’-like sorting in potentially minimizing uncompensated harms.

2. As to why just for immigrants . . .

   The Economist just had it’s predictions for 2016 articles. In it, they predicted that there would be more Islamic terrorist attacks in Europe. The Economist also supports more Islamic immigration to Europe.

   Now, if you can complete a basic syllogism, you’ll note that this means that . . . Well, it at least means that The Economist likes immigration more than it likes the people who will die in the attacks. As to exactly why that’s the case, they don’t say, and I can’t seem to infer.

   In all seriousness, this stuff really is the general consensus. More immigration from Saudi Arabia is necessary because _____, and no one really disputes that at least some people will die because of this.

   This state of affairs seems a bit odd, no? If insurance isn’t your suggestion, what is? My guess is that someone will somehow find a solution and it’s likely to be much worse than insurance.

3. Hmm. I wonder what the personal liability insurance premiums would be for a -studies major at a university would be. Would the rate rise dramatically if the insurer, monitoring social media, discovered the student was becoming active in campus protests? What about those who associate with prior violent protest groups, such as the IMF riots in Seattle? What about drug use or sexual promiscuity, which can lead to violence but also the infecting of others requiring expensive disease treatments.

   And, of course, those who are poor, live in bad neighborhoods, often of color would have to pay higher premiums due to risk and their need for a low deductible.

4. The original article wanders all over the place and doesn’t really pin down what kind of insurance it is talking about.

   If we were talking about health insurance (i.e. insurance against the cost of obtaining health care for the immigrant), it might very well make a lot of sense. This avoids most of the risk that the immigrant somehow ends up on public assistance or charity due to accident or illness. (It might also encourage immigrants from Mexico to get tested for the drug-resistant strain of tuberculosis that is running rampant in south Texas. To be honest about it, the return of 19th century consumption — in a drug-resistant form — terrifies me enough to consider compromising a lot of libertarian principles.) One might extend the same theory to disability income insurance.

   If we are talking about traditional tort, there are insurance principles that would undercut much of the perceived value. Intentionally committed wrongs (e.g., battery) are generally uninsurable on the ground that insuring them would remove the incentive that the legal system creates not to commit intentional wrongs. So, insurance mostly covers negligence. I doubt that there is much angst about “all these negligent immigrants running around doing negligent things.” Further, the most likely situation in which an immigrant will commit negligence that hurts someone is driving — where insurance is already required in most states.

   I think the way that the article tries to bridge this gap is by focusing on the notion of “wrongful immigration,” which would presumably be a claim that an injured party could make against the government for the injury that an immigrant did to them (whether intentionally or negligently). The immigration authority’s decision to admit the immigrant would be the negligent act, to which insurance could maybe apply. But the problem is that the claim would be against the immigration authority, which would have sovereign immunity from suit.

   So this scheme would only work if you also privatized the authority to admit immigrants, conditioned on writing insurance covering the immigrants acts. That might actually make sense as part of an alternative to the government-run points systems. Maybe the government authorizes a group of financially sound institutions to be immigration authorities, charges them a flat fee per immigrant-month, and requires them to pay for any intentionally or negligently caused injuries. The private immigration authorities would have strong incentives to choose the immigrants who can either pay lots or cause little risk. (Presumably, there’s movie in such a world about the sponsored hit man who simply pays through the nose to get in and murders someone. The insurance company then tries to track him down as part of its efforts to deter similar bad actors in the future, leading to the climatic gunfight scene.) But I suspect it is simply too complex to work.

5. Insurance never insures willful acts as not only adverse selection becomes total, but it alters incentives around such actions increasing their frequency.

6. As I recall, around 1975-1985 the Wall Street Journal editorial page was really enamored of this idea, but they have subsequently gone in the other direction.

   This sounds like Krugman’s point on Milton Friedman that the tort courts was better the government bureaucrasy at controlling an individual or firm behavior. The threat of lawsuit probably controls the worst instincts with business firms. (Otherwise, let us read about water contamination and coal mining in WV for reference of firms choices that may significantly impact the population.)

   The only reason why citizens like immigrant insurance is because it puts up barriers to immigration and lets in the right ones.

7. 2 huge problems with mandatory liability insurance:

   1) Theoretical / moral: you are compelling people to pay ex-ante for expected damage inflicted in the future. Aside from necessitating a codification of allowed and un-allowed prejudices on the part of the insurance companies (as you highlight), this violates the innocent-until-proven-guilty principle under which undergirds the legal system and which most people feel to be right. There would also be administrative costs to the system which would be economically wasteful unless you could demonstrate a pretty high level of certainty value. You wouldn’t save any of the costs of the present legal system since you would still need an equivalent procedure for actually demonstrating that a harm occurred and that a particular person ought to be liable for it.

   2) Practical: universal personal liability insurance would be a never ending fraud bonanza corrupting every facet of ordinary life, in which all manner of “harms” would be alleged, the size of which would be too small for insurance companies to be worth litigating. These would inevitably get settled and then the expectation of such would get rolled into premiums. Given the scale of waste, inevitably there would develop an “ethical level of fraud” in which people would justify some amount of fraud on the grounds they are paying out so much in premiums on account of other people’s fraud that recouping some of it with your own is “fair game.” The thought of living in that kind of society should be attractive to precisely zero libertarians

8. As for why immigrants (or their employers) should buy insurance when natives don’t have to, note that immigrant insurance covers only risks added by migration! People (foreigners or citizens) who remain in their native countries instead of migrating would not have to buy immigration insurance because they do not add any risks in the destination country (the base costs of the risks they pose in their own countries are covered by local arrangements). Consider a hot-tempered Pakistani who poses a 1% annual risk of murdering someone. If he remains in Pakistan the annual expected value of his bad temper to his neighbors is 0.01 times less than $1 million, but when he enters the USA it becomes 0.01 times more than $9 million. Furthermore, in Pakistan, however much harm that hothead inflicts on his neighbors, he can inflict virtually no harm on Americans. Asking that Pakistani to carry Sudden Jihad Syndrome insurance while he is in America is like asking him to carry liability insurance while he drives a car in America. The insurance is for incremental risk. (Note that immigration insurance might as well be symmetrical– if the USA requires it other countries may also.)

   The fact that different immigrants, individually or (for example) by national groups pose different risks would be reflected in their insurance premiums, more or less accurately depending on actuarial considerations and how much regulatory “anti-discrimination” foolishness was injected into premium-setting. High premiums might discourage some prospective migrants. That would be a good thing– forcing immigrants (or their employers) to internalize costs which they now palm off on everyone else. Of course, if insurers were required to “community rate” all immigrants equally instead of distinguishing Brahmins from Salafis, the system would not work as well. If immigrants really aren’t very dangerous then their insurance premiums won’t be very high.

   In fact, the big cost would not be insuring against criminal behavior, but against social spending (welfare) consumption. “Community-rated” premiums for that would track the mean expected outlay, which is around $14,000 annually for households in the income range of the mean immigrant household of about $60K (citations on request). Individually-underwritten premiums would vary a lot– immigrant scientists, for example, might pay very little. If we truly cut off social spending on immigrants, we wouldn’t have to ask for insurance against it. (Despite the oft-repeated big lie that immigrants are “not eligible for welfare,” they actually are. Really. Please don’t make me provide the citations again.)

   Sailer didn’t offer a detailed proposal. He was trying to put across the point that some immigrants inflict outsized costs– way more than their individual labor is worth– and those are currently absorbed by citizens at large instead of by the folks who benefit from immigration (the immigrants themselves and employers). Employers want to privatize profits (cheap labor) and socialize costs (e.g., Obamacare subsidies for immigrants [official link]). Textbook theory says we should press them to internalize all their costs. There is an insurable risk, and the premiums should be paid by immigrants. For those who work the costs would pass through to their employers and for those who don’t (currently 2/5) the costs would fall on whoever supports them. Employers certainly could pay premiums for SJS insurance. The moral hazard would be small because employers do approximately nothing to control immigrants now so they could hardly do less.

   • So, when the well-known Canadian drug cartel sends a hit man south, he buys insurance, and his victim’s family files a claim against his insurer? It seems more than odd to insure intentional torts.

     If you are right that the big cost is not intentional torts, but use of social spending, then surely the right answer is either to truly eliminate the social spending or to sell immigration permits at a price that more than recovers the social spending. If your point is that immigrants use social services, and that’s wrong, then its again an intentional wrong, which makes insurance a tough fit.

     I think you could get very close to the same result by simply charging a fee for work visas. Imagine if every H-1B visa cost $2,000 per month, but you took off the cap on the number of visas issued. The price would certainly limit demand, and the high cost would more than cover any related social spending. Only immigrants who have enough skills to make more than their cost of living plus $24,000/year would take those. Surely, anyone who can make tat much in the US ought to be invited to come and contribute to society. (Except the Canadian drug cartel hit man.)

9. Thanks to Professor Kling for this blog post–I was the reader who suggested it.

   Perhaps “tort insurance” is not the correct term or idea–something along the lines of “performance bonds” might be a better idea. Bonds would need to be subscribed to by individuals, with their attributes (age, nationality, literacy, history of previous immigrants of their type) influencing the cost of individual subscription.

   Bonds could be used to defray the costs imposed by immigrants (crime, imprisonment, welfare dependency, spree killings, jihadi attacks).

   Based on my imperfect knowledge of of the history of immigration, different immigrant communities vary considerably in the costs and benefits they bring to their host societies.

   The San Bernadino jihadists are a spectacular example of the immigrants the USA would have been better off not admitting, but there are other noticeable differences, some of which can be predicted in part by nation of origin, age, and sex, as well as other traits (literacy in one’s own language, knowledge of the Latin alphabet, experience with an urban cash economy).

   Steve Sailer’s idea, though imperfect, gets at the notion that information on various immigrant groups has been imperfectly monetized. There are few opportunities to make money on variances in (1) tendency to commit crimes, (2) labor force participation rates, (3) inclination to start businesses, (4) dependency on income support programs such as food stamps / EBT, Section 8 housing, Medicaid, etc.

   Additionally, “chain” immigration frequently becomes self-sustaining. Paul Collier said it in _Exodus_: One of the greatest controversies is the right of a current immigrant to bring in family members.

   Perhaps businesses hire employees more carefully than the USA admits candidates for long term residence and potential citizenship.

   I’ll end with an idea from one of Colin McEvedy’s historical atlases. To paraphrase, he noted that in the Greek city states of antiquity, citizenship was difficult to get and easy to lose. In the Roman Republic (and then Empire), it was easy to get and hard to lose.

   We have adopted the Roman model (obviously, we are not Rome). Seeing that the USA has, for whatever reason, chosen to admit persons rather carelessly into the country and becoming a citizen is relatively easy–is the USA allowing people into the country in a prudent fashion? Is there anyway to encourage a better internalization of costs currently externalized upon society in general? Tort insurance? performance bonds? Anything?

   More specifically, is there a way to incentivize good behavior and sanction bad behavior?

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