Arrest Insurance

September 15th, 2010   Submitted by Seth King

Not to be confused with the current system of corporate insurance that we’re all suffering with today, truly free-market, and therefore underground, insurance companies are absolutely essential in creating a voluntary and prosperous society. Insurance, as it is historically understood, is nothing more than a hedge against risk. Unfortunately, the meaning of the term has come to be synonymous with welfare and has, as a result, completely perverted the benefit that insurance provides.

My motivation for writing this article comes from an organization whose sole purpose is to financially help individuals who have been arrested for victimless crimes while committing acts of civil disobedience. Despite my support for this organization, it is my conviction that their current method of fund raising through donations is destined for mediocrity at best, and abject failure at worst. It is my hope that this organization, or a similar competitor, will adopt a traditional insurance style system that accurately reflects the risk to reward nature of civil disobedience.

One can argue that insurance has helped to build modern civilization as much as petroleum. Insurance affords individuals and companies alike the ability to engage in behavior that would be prohibitively risky without it. Circumstances that would have dealt catastrophic blows to families and industries centuries ago can now be shrugged off as minor setbacks.

The essence of insurance is that of a small wager. It is a gamble we all hope to lose, whereby losing means no catastrophe has befallen us and our only cost is that of a small premium. If a sudden calamity does strike us, its full effect is absorbed by the much larger number of other premium payers. It is a form of voluntary socialism that benefits all involved for it allows each insurance holder to choose their own risk/reward ratio and wager an amount they desire. Another’s increased risk-taking has no bearing upon the risk averse. This contradicts that of forced socialism whereby the costs of increased risk-taking are disproportionately borne by the risk averse, thereby creating a tragedy of the commons. The natural result is that of an increase in risk taking by the risk averse in the attempt to return to the risk/reward equilibrium they desire, thus increasing the overall risks to the point where insurance premiums become prohibitively expensive.

It should come, then, as no surprise that despite the discovery of petroleum over one hundred years ago countries lacking a free-market in insurance stagnate as if still in pre-industrial times. Understanding the nature of insurance also offers us a bit of seeming clairvoyance as to the direction the western world is heading as it continues to destroy the delicate balancing act of risk/reward ratios only parties voluntarily contracting can decide. Sadly, this trend will continue so long as people believe that insurance is suppose to cover foreseeable, routine and non-catastrophic costs as well as return in benefits at least, if not more than, their original premiums.

I’ve written in an earlier post both the necessity for, and the machinations of, underground insurance companies. I would now like to detail how the risk/reward ratio works in relation to a possibly new and unheard of enterprise of arrest insurance, although the information could just as easily benefit any and all other types of insurance.

The first thing we must understand is that civil disobedience is risky. While there may be few varieties of risk associated with civil disobedience, the intensity of punishments and type of disobedience involved is what will factor heavily into arrest insurance. Risks include arrest, asset seizure, bodily injury and loss of income to name a few. The intensity of punishments range wildly including length of jail time, amount of lost income, amount of assets lost and variety of bodily harm. The types of disobedience also vary including public or discreet disobedience and likelihood of arrest.

Each individual applying for arrest insurance would likely fill out a lengthy questionnaire to determine his or her risk level. A person who drives without a license would likely face an impounded automobile(price of which is factored in), small amounts of jail time and income loss(wage or salary also to be factored in).

The total risk would likely be considerably lower than someone who does not pay income taxes(chance of getting caught varies but risks long prison sentence), smokes cannabis openly(high likelihood of arrest) and cuts hair without a license(low risk of getting caught with low penalty). All of the myriad of risk levels would have to be mathematically determined for each applicant. To be clear, individuals who only insured themselves against driving without a license would not receive claim money if busted for possession of cannabis. Only the risks insured would be covered. The greater the punishments levied, the greater amount of claim money would be awarded.

After the risk level is determined a corresponding premium would be levied monthly against the party insured. The more risks a person insured himself against the higher their cost. Unlike today’s system, the claimant’s co-pay amount would not be arbitrary but instead based upon the number of similar policy holders. For example, if ten individuals insured themselves against cannabis disobedience and the reimbursement for arrest was determined to be one thousand dollars, the individual arrested would co-pay the amount of one hundred dollars, the same as the other nine individuals. If three of the individuals were arrested in a given month, the total reimbursements would be three thousand dollars, thus the co-pay would equal three hundred dollars. It is this mathematical model that also determines the monthly premiums, at least until the number of policy holders becomes so large that the variance is dramatically reduced.

Insurance is very mathematical and in the marketplace the companies that are most efficient will come out ahead as opposed to those with the most political pull. At the moment, every facet of modern insurance has been grossly distorted by government. In particular, health insurance has been riddled with so many arbitrary regulations that consumers no longer have a rational incentive to buy in, hence the new federal government mandate forcing citizens to purchase a product they neither desire nor can afford. Many other types of insurance are mandated and even subsidized by the government.

Anarcho-capitalists, agorists, and voluntaryists alike are going to have to replace the corporate insurance minions before we can hope to destroy the state. It is my hope that I will see in the very near future a growing supply of, and demand for, underground insurance. If we use our imaginations and our talents, I have every reason to believe that we can provide both alternative and traditional insurance better than our statist counterparts.

3 Responses to “Arrest Insurance”

  1. valhelionNo Gravatar says:

    Nice article and definately a positive area to focus on. Critiques:
    1) Moral hazard is high for CD insurance. Generally the payout will have to be on par with the co-pay and premiums as it is extremely likely to be caught.

    2). A DRO (dispute resolution service) will have to exist to resolve claims disputes and would have to be a pre-requisite for underground insurance, especially for overt CD.

    3). Perhaps providing insurance to compensate in the event that the state abuses its power, like searching without warrants, harassment, brutality, excessive force, torture, or accidental death due to wreckless endangerment by the cops. I would personally pay for this as the premiums could be low and the payout high due to the unpredictability of the cops.

    4). Should ideally only work off of alternate currencies.

    5). The insurance providers and investors will have to be crafty for getting around laws that erect barriers to entry. Persons providing said insurance would basically be running a criminal operation and would be a high priority target. That is the biggest challenge that I see. Perhaps if they operated from a non extradition country and contracted local ‘insurance agents’ in all the market countries.

    6). I would personally like to see underground health insurance. I think once national healthcare goes into effect and the market responds to the new reality of shortages, poor quality, and high prices that people will demand black market healthcare. Right now, if such a system existed, I would cancel my premiums with the state institutions and sign up for cancer insurance, accidental death and dismemberment, and maybe a few other things.

    7). Another thing I just realized. I might need insurance for posting such subversive, conspiratorial comments LOL.

    • Seth KingNo Gravatar says:

      #1 Not all civil disobedience has that high of a likelihood of getting caught. For example, driving without a license. Some people go 20 years without getting pulled over. If I’m one of those people, not having a license will be a non-issue.

      #2 In my previous post, which I linked to in the article, Desperately Needed Underground Enterprises, I write about how an underground arbitration system is the first and most important underground enterprise that needs to be established before insurance or banking will take off. I’m in the process of creating an underground court system that I think is really going to shock a lot of people with its effectiveness. To be continued…

      #4 I agree that new underground anarcho-capitalist enterprises should run off of real money. If we don’t ever demand it, it will never happen.

      #5 In my article Desperately Needed Underground Enterprises I write about how the underground insurance company would operate, whereby it never has one dollar of claimant money pass through its hands, only its operating fee. If the drug trafficking business can do it, we can do it.When there is a will, there is a way.

  2. Bradley RNo Gravatar says:

    This reminds me of the organization here in Sweden. You pay 100 SEK .15,10$, per month and if you ever get caught without a ticket in the Stockholm subway they pay the fine for you out of this collective pool. The fine is 1200SEK (181$).

    I’ve been using the subway for 5 years without buying a ticket (: Though personally I don’t use their service since there is a “hack”, a method, to avoid having to pay the fine they issue if they catch you (I’ve only been caught three times during this entire period and the method has worked on all instances).

    Also they introduced the ability to pay via SMS, so since 2009 there is a smartphone app that makes fake SMS-tickets (which to the eye is impossible to spot from real ones) too soo ever since I’ve been riding the busses without paying for buss tickets too (: Civil disobedient ftw.

    If you’re interested in learning more the people behind it is probably more than happy to share their experiences and brainstorm via email (sadly the site is in swedish).