Should Insurance Companies Run the World?
In the absence of any central authority, what can improve frum communal institutions?
Making decisions about complex issues impacting large populations isn't easy. Even fully understanding the problems you're trying to solve can be baffling. Coming up with appropriate solutions is much harder. And figuring out how to successfully implement those solutions will generally lie far beyond the reach of any mere mortal.
When it comes to competence, governments - as a rule - haven't bathed themselves in glory. I recently read a review of an academic book (whose title I've unfortunately forgotten) whose main thesis was that all the big decisions made by the US State Department and foreign policy establishment over the past half century were not only wrong, but weren't in any way connected to real-world evidence.
I expect that most of us would agree that our ruling class' record on pandemic management probably hasn't been much better.
Frum communities are large, widely distributed, and diverse. The problems we face mirror all the complexity of general society, but also have their own peculiarities and constraints. But the complexity is confounded by the fact that there is no central authority: no governing body that's responsible for trying to understand the facts on the ground or come up with solutions.
There's no one to blame for this situation, because there's no one with the complete skill set or job description to do anything about it. The fact that there are a few talented individuals who volunteer to push back against the chaos is remarkable and we should be grateful. But it would be nice if there were something a bit more predictable and effective.
Economists might say that it all a comes down to establishing the right incentives. Government employees, for example, generally enjoy legal immunity from claims arising from catastrophic consequences of their choices. So, by and large, they aren't sufficiently motivated to fully think things through.
But you don't necessarily need government regulations - or even a moral code - if hard financial facts can motivate people to do the right thing. After all, there's no law saying you have to go shopping for food. That annoying rumbling in your stomach does a great job guiding you along the right path.
Not sure you trust public health pronouncements about the current state of COVID risk? There's a more reliable measure already available.
A month or so back I purchased travelers' insurance for family members planing a trip from Canada to the US. Just before I confirmed my payment through the insurance company's online portal, a message was displayed informing me that each insured traveler was eligible for 2.5 million dollars of COVID coverage. That is to say, the $5 each traveler was paying for each day they'd be out of the country included coverage for up to $2.5 million in COVID care.
Back in mid-2020, such coverage was impossible to purchase at any rate. If an insurance company is now willing to offer $2.5 million, it means they're pretty confident that they'll never have to pay it out. Or, put differently, their actuaries and underwriters have crunched the numbers and confirmed that the real risk is below minimal.
To some degree, incentives that have had some impact on the frum world already exist, too. We all remember the Meron tragedy last year. We're also aware that both experts and ordinary citizens had been warning for many years of the risks posed by such huge, uncontrolled crowds surging through unregulated facilities.
Yet, even after the horrifying catastrophe, the site wasn't officially shut down by the frum community, the police, or the Israeli government. It was, according to reports, the fact that no insurance company would agree to cover the operation. I don't know what - if any - coverage they had until now, but I do know that the threat of lost coverage got everyone's attention.
This is true in many areas of life. As I noted in my recent "But It'll Be Cheaper if You Pay Cash" article, even simple operations like in-home daycare businesses are "forced" into safety compliance by the threat of insurance rules. That not everyone complies is simply due to widespread ignorance of the details in the insurance contracts we all sign.
Who says that insurance companies are always on target with their assessments? No one. But, for some very good reasons, they're far more likely to get it right than just about anyone else. After all, they've got:
"Skin in the game" - meaning, their very financial existence depends on not exposing themselves to unmanageable risk
The analytical capacity and resources (through their teams of actuaries) to use data to fully understand reality in a way that’s unobscured by political and cultural preconceptions
The statutory and fiduciary responsibility to fulfill the terms of their contracts and shareholder agreements
Are there other institutions that can be used in similar ways to quietly and efficiently leverage good behavior in the service of society? Any thoughts?