Public Interest vs Private Profit - Mark Hoban

TL;DR

The lecture explores the evolving role of insurance in delivering public policy objectives and discusses the importance of balancing public interest and private profit.

Transcript

welcome to Gresham College event the Sir Thomas Gresham lecture here at the Royal College of Surgeons for those of you don't know me my name is Michael Minelli I'm the emeritus professor of Commerce and it's a real delight to be here at our 12th Sir Thomas Gresham lecture we're very pleased that this 12th lecture on government finance and risk tran... Read More

Key Insights

• 🥅 Insurance has evolved from a private transaction to a means of achieving social policy goals.
• 🔒 The balance between public interest and private profit is dynamic and can be easily disrupted.
• ❓ Government intervention is necessary when the equilibrium between insurers, customers, and the government is disturbed.
• 🥺 Collaborative efforts between insurers and the government can lead to better outcomes for customers.
• ⚾ A coherent public policy framework is essential in creating demand for insurance-based products.
• 🏬 Joined-up policy between different government departments helps align public policy, private profit, and personal responsibility.

Questions & Answers

Q: What are some examples of public policy objectives that insurance can help achieve?

Insurance can help deliver public policy objectives such as providing pensions for older people and ensuring compensation for victims of accidents through compulsory third party motor insurance.

Q: How has the use of data in insurance pricing created tensions between insurers and the government?

The use of data has enabled insurers to tailor prices to individual risk characteristics, but this has led to higher premiums and exclusions for some individuals. This has prompted government intervention, such as the creation of the flood reinsurance scheme, to address accessibility and affordability issues.

Q: What are some potential solutions for ensuring affordable and accessible insurance for all?

One potential solution is the creation of a special purpose vehicle, like flood re, to offset the impact of higher prices. Another option is for the government to require insurers to offer insurance at set prices or to subsidize premiums. Balancing the interests of insurers, customers, and the government will be crucial in determining the best solution.

Q: How can insurers and the government work together to achieve mutual benefits?

Better understanding the pressures and economics faced by insurers can lead to collaborative efforts to reduce costs for both insurers and customers. This can be seen in initiatives like the reduction of motor insurance premiums through tackling referral fees. A closer partnership between insurers and the government is essential in navigating changing market practices and pressures.

Summary & Key Takeaways

• The lecture discusses the changing role of insurance from a private transaction to a means of achieving social policy goals.

• It highlights the challenges and tensions that arise when the equilibrium between private profit and public interest is disrupted.

• The lecture focuses on two specific areas: flood insurance and pensions, and explores how government and insurers can work together to restore this balance.