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The case they make for near universal K&R insurance is extremely compelling. It does however remind me of the old PG piece on submarine news articles. How could

• pmoriarty 4y ago
  "The case they make for near universal K&R insurance is extremely compelling" Wouldn't that encourage more kidnappings, since everyone (and not just the wealthy) would become lucrative targets?
  • generalizations 4y ago
    And that would increase the value of the insurance
  • darkerside 4y ago
    No, because if you read the article, they still need to raise the money themselves before the payout. The total payout is related to their net worth.
  • MichaelZuo 4y ago
    ‘ There were caveats to prevent fraud and to ensure that the existence of the policy did not actually increase the risk of kidnapping. The first was that the policy had to be kept secret. In fact, it could be voided if its existence became public. The concern was that if the kidnappers knew of the policy, they would demand more money. The second principle is that the policy will only reimburse the ransom once it is paid. The insurance company never fronts any money. In order to raise the cash, the victim’s family will probably have to liquidate assets – mortgage the house, sell stocks, pool money from other relatives. This process makes the negotiations credible by dragging them out. This is not just about minimising the payout by the insurance company. Quickly making good on a large ransom raises the expectations of future kidnappers. It can make hostage-taking more lucrative and more common.’ A few paragrphs into the article. Whether or not that can entirely eliminate the moral hazard is yet unresolved.