4 ms·

The moral hazard would make it too difficult (read: impossible) to price the risk.

• ef4 14y ago
  Good point.
• bcoates 14y ago
  If you make it a routine requirement of business deals it'd soften the moral hazard.
• macspoofing 14y ago
  How so? Having your defense funded doesn't guarantee you immunity or a "not guilty" verdict. Where's the moral hazard?
  • mikeash 14y ago
    In short, people would take out the insurance right before they commit a crime so they didn't have to pay for their own defense. It doesn't guarantee a verdict, but if you've decided you're going to go to trial anyway, you might as well take out the insurance, and I don't see how the insurance company could survive in that environment, since the principle of insurance is that most people won't need it.
    • tossacct 14y ago
      The service exists, and presumably is profitable: http://en.wikipedia.org/wiki/Legal_expenses_insurance http://en.wikipedia.org/wiki/Legal_expenses_insurance To address your comment in detail: 1)>>>In short, people would take out the insurance right before they commit a crime so they didn't have to pay for their own defense. 2)>>>I don't see how the insurance company could survive in that environment, since the principle of insurance is that most people won't need it. Point 1: Require the insurance to be delayed: you must pay into the insurance for X number of years before it can be used. In this case, "right before they commit a crime" will end up being long enough to recoup the costs of the defense. An actuary can help find what number of years is needed for the specific business. http://en.wikipedia.org/wiki/Actuary http://en.wikipedia.org/wiki/Actuary Point 2: All insurance companies are faced with the challenge of survival. They often overcome this challenge by increasing their pool of customers: "most people won't need it" and are profit centers, the few who do need it are the cost centers. Again, actuaries are the folks to call.