Blue Equals Green

07.10.13

The Insurance Industry’s Liberal Turn

They’re powerful, they’re greedy, and liberals are often suspicious of them. But the insurance industry’s obsession with profits is turning them toward progressive positions on issues like gun control and climate change.

The list of progressive heroes continues to expand: Rachel Carson and Ralph Nader, James and Sarah Brady, David Boies and Ted Olson. Aetna and MetLife.

Wait, what? Insurance is a large and varied industry, and frequently plays the heavy and bogeyman, especially the health insurers. When they’re not denying coverage, they’re jacking up rates to unsustainable levels. Insurers have a great deal of power. You have to buy their products in order to get a mortgage, drive a car, or open a store. Pretty soon, you’ll have to buy health insurance or pay a fine. Many organizations, entities, and businesses can’t operate without insurance coverage, at least if they are remotely prudent.

The people who work in insurance are bean counters, numbers geeks, people who are obsessed only with actuarial tables, profit and loss tabulations, and mortality rates. Social change, justice, equity, and low-impact lifestyles matter little to them. It’s all about whether the premiums they can charge and collect can cover the losses they have to pay out.

And yet. Precisely because of their power, they can actually be forces for social progress. They can help—and have helped—achieve goals that social liberals have long advocated but were unable to obtain through the ballot box, the legislature, or the courts. For example, insurers tend to like public policies and regulations that save them money by reducing injuries and removing risk from life. This impulse drives libertarians nuts. But it also means that insurance companies are reliable and active supporters of nanny-state issues. Insurance companies lobbied for mandatory seat-belt laws and regulations that required car manufacturers to put airbags in vehicles. Health-insurance firms would really prefer not to insure smokers, which means they provide cover for employers who want to ban smoking in or around the workplace.

Precisely because of their obsession with numbers and data, they are dispassionate about social issues. There’s little room for ideology—on either side—in the insurance industry. Sure, forcing people to wear seat belts, or forcing car manufacturers to put airbags into cars, may be an intrusion into personal liberty and business operations. But the industry was able to quantify the gains it would reap in injuries avoided and lives saved if they were mandatory.

It so happens that on a number of recent issues, insurance companies’ desire to protect profits and long-term viability aligns with the goals of progressives. Take Obamacare. Acting entirely out of self-interest, the U.S. health-insurance industry ultimately supported the Affordable Care Act. The insurance firms were willing to swallow the bitter medicine of not being able to deny people for preexisting conditions in exchange for the individual mandate and other measures that would increase their business. Corrupt bargain in the service of bigger industry profits? That’s one way of looking at it. But you could also regard it as a giant leap forward, a “big fucking deal,” in the words of Vice President Joe Biden. Increasing the number of people who have health insurance, and subsidizing their efforts to do so, is an instance in which a progressive policy goal meshes with insurance companies’ bottom line.

Sometimes insurers can achieve what progressives can’t in the legislature. The left has been generally horrified at the policy response to the Sandy Hook massacre. Congress refused to act on more aggressive gun control. And states like Kansas and Utah actually passed laws permitting adults to carry guns in schools. Five hundred MSNBC segments on the topic couldn’t stop these laws from going into effect. But insurance companies are stepping in. Regardless of executives’ beliefs about gun control, they know that more guns being carried around tends to lead to more shootings, which leads to more health-insurance and life-insurance claims.

Some insurers are putting their feet down. The Des Moines Register reported Tuesday that an Iowa-based firm, EMC Insurance Cos., which provides insurance for virtually every Kansas school district, “has refused to renew coverage for schools that permit teachers and custodians to carry concealed firearms on their campuses under the new law, which took effect July 1.” The motivation was purely financial. “We’ve been writing school business for almost 40 years, and one of the underwriting guidelines we follow for schools is that any on-site armed security should be provided by uniformed, qualified law-enforcement officers,” Mick Lovell, EMC’s vice president for business development, told the Register. If insurance companies regard trampolines on school property as unnecessary risks, they sure as hell aren’t going to embrace the presence of gun-toting custodians.

Insurers have outsize power compared with their status. Nobody would place insurance brokers as among the most powerful men and women in a given community. But they can exercise a powerful veto. Banks and investors won’t put money at risk without the presence of insurers. By withholding insurance, they can influence certain behaviors and effectively ban others—even in the absence of laws. You don’t need a ban on carrying guns in schools if no insurer will write policies for schools that let people with guns in them.

Insurers don’t have to watch Al Gore’s An Inconvenient Truthto grasp the threat posed by higher air and water temperatures and rising seas.

Then there’s climate change and global warming. This is another policy area in which progressives have been stymied by flat-earthers and industry hacks in Congress. But you won’t find any climate-change or global-warming deniers in the insurance industry suite. The vast property-insurance industry has departed from the business community at large. In 2012 big insurers withdrew their support from the Heartland Institute, a climate-denying think tank. (The last straw was Heartland putting up a billboard with a picture of the Unabomber as emblematic of global-warming believers.)

Insurers don’t have to watch Al Gore’s An Inconvenient Truth to grasp the threat posed by higher air and water temperatures and rising seas. They see it in their daily lives. Insurers are the ones who have to write the checks when extreme weather hits. Since they’re in the business for long term and have to match up money coming in and money going out over a period of 20 years or more, they can’t help but look ahead. How do you commit to insure a new resort on the Maldives if you’re not sure the Maldives will be there in 10 years?

Last week there was an interesting new report from the Geneva Association. It may sounds like a Ken Follett novel, but the Geneva Association is a global gathering of insurance-industry heavyweights. “There is new, robust evidence that the global oceans have warmed significantly,” said John Fitzpatrick, secretary-general of the Geneva Association. While everybody focuses on atmospheric temperatures, “it is the oceans that are the principle conveyor of energy around our planet,” the report said. And that means more extreme weather is rapidly becoming a new normal, with economic consequences that are potentially damaging to the insurance industry.

Now, the Geneva Association isn’t saying we should all drive Priuses, put solar panels on our roofs, and start composting. It isn’t quite willing to advocate for a huge carbon tax to combat global warming. And it isn’t say insurers should refuse to insure—or reinsure—projects that are built near coastlines. Not yet, at least. It’ll take another few years for that to happen.

But the report did conclude that “governments and the private sector need to increase the resilience of communities by managing risks through a series of means, in particular building resilient infrastructure.” In other words, the insurance industry is calling for that great progressive desideratum: a huge, global public-works program.