Government Insurance Programs Overview
Social Goals
Achieving societal objectives through government insurance programs
Positive Externalities
Benefits to society and economy from government insurance participation
Auto Liability Insurance
Compulsory insurance in most states, mechanisms ensure coverage for all drivers
TRIP Extension
Congress extended TRIP due to inadequate private market terrorism insurance
State vs. Federal Programs
Decision based on political motivations and other factors, serving different purposes
Workers Compensation Laws
Encourage injury prevention and rehabilitation, creating positive externalities
Building Codes Enforcement
Encouraged by NFIP to reduce flood exposure in new construction
Efficiency of the Market
Enhanced by reducing insureds' time or resource expenditure for coverage
Government Insurance Plans
Established by legislators for specific purposes, avoiding private insurer bids
NFIP and Federal Crop Insurance
Examples of property-casualty insurance with federal government involvement.
Exclusive Insurer
Government as the sole insurer due to law or lack of private competition
Partner with Private Insurers
Government collaboration with private insurers when private coverage is insufficient
Efficiency in Insurance Market
Government involvement to enhance market efficiency and convenience for insured individuals
Direct Competition
Government operating insurance plan in competition with private insurers
TRIP and NFIP
Government partnerships with private insurers for specific insurance coverages
Terrorism Risk Insurance Program (TRIP)
Government program providing reinsurance for terrorism losses, established by TRIA
Reinsurer
Government providing reinsurance to private insurers for specific coverages
TRIP
Government reinsurance plan for specific loss exposures, partnering with private insurers
Insurance Market Efficiency
Government role to enhance market operations and convenience for buyers
Government Property-Casualty Insurance Programs
Government-run insurance mimicking private insurers' functions.
Premium-to-Surplus Ratio
Indicator of an insurer's capacity to assume new business.
Risk Tolerance
Individual's willingness to take on risk.
Market Failures
Instances where private insurers fail to provide insurance products at acceptable prices
Workers Compensation Insurance
Mandatory insurance for workplace injuries, ensuring coverage availability
Private Insurance Market
Mature market allowing consumers and insurers to interact for insurance products
Policyholders' Surplus
Measure of an insurer's financial strength.
Insurance Pricing Goal
Objective of an insurance transaction's pricing.
Federal Government Involvement
Occurs when issues extend beyond state boundaries or interstate commerce.
NFIP's Write Your Own Program
Partnership where private insurers write flood policies under federal government reinsurance
Government Insurance Programs
Programs filling unmet needs, compelling insurance purchases, and achieving social goals
Incentives for Insurance Purchase
Provided by government through regulation and reasonable pricing
Insurable Characteristics
Qualities making loss exposures suitable for insurance coverage.
State Regulatory Constraints
Regulations influencing the availability of insurance at the state level.
Compulsory Insurance Purchases
Requirement for insurance purchase to manage risks efficiently, e.g., workers' compensation
Windstorm and Beach Plans
State government-run insurance programs for specific risks.
Competitive Workers Compensation Funds
State-offered insurance programs for workers' compensation.
TRIA
Terrorism Risk Insurance Act of 2002, established TRIP for terrorism reinsurance
Reinsurance
Transfer of risk from primary insurers to other parties.
Factors Affecting Demand for Insurance
Variables influencing the desire for insurance coverage.