B - Government Insurers Study Note Flashcards
GOVERNMENT INSURERS STUDY NOTE
5 reasons for govt participation in insurance
1) TO FILL INSURANCE NEED UNMET BY PRIVATE INSURANCE
- Residual market (govt offers insurance in market where private insurance is not available nor affordable)
- Insurability requirement less for govt than for private insurer
- Govt has the capability to subsidize the loss
- Ex : Crop and Flood Insurance.
2) COMPULSORY PURCHASE OF INSURANCE
since purchasing insurance is sometimes mandatory, govt obliged to offer insurance to people not able to find it from private market
-Ex : FARM
3) CONVENIENCE
govt can set up a program quickly as they can get funding easier than private market
-Ex : TRIA Program
4) GREATER EFFICIENCY
belief that govt can provide service at a lower cost than private market
5) SOCIAL PURPOSES
can only be achieved through govt insurance (rehab, vocational training)
-Ex : social security
GOVERNMENT INSURERS STUDY NOTE
3 levels at which a govt insurer can play a role
For each, give an example.
1) EXCLUSIVE INSURER (Social Security) 2) PARTNER WITH PRIVATE INSURER (Terrorism Risk Insurance Program) 3) COMPETITOR WITH PRIVATE INSURER (Workers Comp)