2013 Nobel Prize winning economist Robert Shiller suggests that insurance is a vitally important financial technology that "will lead to much better lives for all of us". If true, it is an extraordinarily underappreciated fact. Can insurance actually make our lives better? How?
Is it possible for a promptly paid claim to make a family whole after a fire destroys their home or their bread winner dies? Is there something fundamentally wrong with attempting to mitigate risks with insurance instead of, say, producing something of value? Does insurance offer real value? Are there better ways to manage risks than with insurance? Is insurance a vital tool for civilization to manage its risks?
That is, is insurance a boon or a boondoggle? If insurance is a boon, how can we make it work better for all of us?
We will explore how insurance works as a financial risk management technology, the nature of insurance contracts and the challenge of moral hazards which they present, and we will explore ideas about using insurance to make our society more resilient to the inevitable disasters large and small that beset life even in advanced civilizations.
I have consulted the following four resources so that we can approach this important subject comprehensively:
• In this 73 minute video, Robert Shiller details the importance, purpose, problems, and nature of insurance with a view to preparing his Yale students to help improve the insurance offerings available to society. Read my extensive notes on Shiller's lecture. (https://plus.google.com/104222466367230914966/posts/MuFjsLtKbeE)
• In this 70 minute video former AIG CEO Maurice "Hank" Greenberg speaks to Shiller's class about insurance and the blowup at AIG during the financial crisis that began in 2007. Is Greenberg a creep or a visionary? What can we learn about the nature of insurance from his story? Read my notes on Greenberg's lecture. (https://plus.google.com/104222466367230914966/posts/fBSidKmgCpL)
• Robert Shiller's book "Finance and the Good Society" includes the following recommended readings on insurance: Chapters 7 (Insurers), a brief mention of unemployment insurance and Shiller's proposal to insure against declines in home prices to help stabilize our economy on pp. 116-7, and the paragraph about Charles Ives on p. 136. Follow this link to the New York Times' book review of "Finance and the Good Society" (http://www.nytimes.com/2012/06/24/books/review/finance-and-the-good-society-by-robert-j-shiller.html). The book is a conversation starter and as such is full of ideas with which you are expected to grapple and (usually) disagree. As such it is good fodder for discussions.
• The book "Social Insurance: America’s Neglected Heritage and Contested Future" by Theodore R. Marmor, Jerry L. Mashaw, and John Pakutka explores social insurance in broad terms. This link takes you to the publishers page on the book. (http://www.cqpress.com/product/Social-Insurance-America-s-Neglected.html)
This is the third discussion in a series based on Robert Shiller's free online course ECON 252: Financial Markets (http://oyc.yale.edu/economics/econ-252-11). Here are links to the previous meetups that I've organized on this course:
• Financial Markets, Risks, & Crises (8 Dec 2013) (http://www.meetup.com/thinkingsociety/events/146704782)
• Financial Markets, Risks, & Crises -- Repeat (21 Dec 2013) (http://www.meetup.com/thinkingsociety/events/153236352)
• Technology and Invention in Finance (16 Feb 2014) (http://www.meetup.com/thinkingsociety/events/160217332/)