Insurance as Governance

Insurance as Governance

Richard V. Ericson
Aaron Doyle
Dean Barry
Copyright Date: 2003
Pages: 384
https://www.jstor.org/stable/10.3138/9781442676220
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  • Book Info
    Insurance as Governance
    Book Description:

    Insurance as Governanceis the first major sociological study of the insurance industry. It examines how the industry controls our institutions and daily lives in ways that are largely invisible, and how it thereby functions as a form of government beyond the state.

    Drawing on extensive ethnographic research on industry practices, the work penetrates the complexities of the insurance industry and demonstrates why it is such a powerful and pervasive institution. The authors advance the concept of moral risk as they consider how insurance companies partner with governments and corporations in the negotiation of economic policy.

    In effect,Insurance as Governancedocuments liberal theory at work. It offers a major case study of liberal governance beyond the state and explores such larger issues as how insurance is increasingly liberal rather than welfarist in orientation, and how insurance is the vanguard of liberalization in governance throughout postindustrial societies. Wide-ranging in scope and original in approach, the text provides a sophisticated integration of empirical data and theoretical approaches relating to insurance, risk, governance, and security.

    eISBN: 978-1-4426-7622-0
    Subjects: Sociology

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Acknowledgments
    (pp. vii-2)
    RICHARD V. ERICSON, AARON DOYLE and DEAN BARRY
  4. Introduction
    (pp. 3-18)

    Insurance is embedded in all aspects of daily life. Yet how the insurance industry operates is not widely understood. Most individuals have several insurance policies - some obligatory, others by choice - and appreciate that these policies are among the most costly necessities of life. Nevertheless, insurance remains in the background. It is something that people take for granted to meet exigencies they would prefer not to think about.

    Insurance also remains in the background in social science. Except for narrow specialisms in law and economics, it has not been subject to extensive analyses. Although the insurance industry is among...

  5. PART I: GOVERNANCE, INSURANCE, AND MORAL RISKS

    • 1. Governance beyond the State
      (pp. 21-42)

      TheFinancial Timesof London regularly publishes a feature section on states. Each time this section appears, a particular state is surveyed through articles on its political economy and data on its economic performance. Also included are display advertisements paid for by the state that promote its favourable investment environment. These sections are comparable to inserts found in local newspapers where, for example, a car dealer or insurance agent pays for a display advertisement and then also obtains ′advertorial′ space in the ′news′ columns to write something in greater depth intended to create additional desire for the product. The difference...

    • 2. Insurance as Governance
      (pp. 43-65)

      Governance beyond the state is widely discussed and analysed in academic literatures, such as those that address globalization, postmodernity, and knowledge societies. It is the subject of even more pervasive attention in mass media and public discourse, as different approaches to governance are rationalized and implemented. The institution of insurance is an ideal locus for researching governance beyond the state. Yet, except for narrow specialisms in law and economics, with their preference for rational choice models, social scientists have paid little attention to insurance. As Slater (1997: 51) and Schor (1998: 212n9) remark, economics rarely examines social and especially cultural...

    • 3. Governance through Moral Risks
      (pp. 66-98)

      The relationship between risk and morality is the subject of fervent debate across academic disciplines (Ericson and Doyle 2003). Some scholars view the concept of risk and practices of risk management as not being morally principled. For example, Giddens (1990, 1991) argues that the ascendency of abstract systems of risk entails the ′evaporation of morality′ as people increasingly focus on pragmatic knowledge of risk in their immediate environment to routinize their activities and feel secure. ′Moral principles run counter to the concept of risk and to the mobilizing of dynamics of control. Morality isextrinsicso far as the colonizing...

  6. PART II: GOVERNING THE INSURERS

    • 4. Negotiating Political Economies
      (pp. 101-138)

      Insurers have a unique responsibility to remain solvent in order to make good on what they have sold, their promise to pay. In this regard they differ from other inefficient businesses that go bankrupt, which have at least distributed most of the goods paid for by consumers.

      Insurance solvency cannot be left to the unfettered effects of the market. The political economies of insurance operations must be negotiated among members of the insurance industry and state regulatory agencies. Negotiation focuses on risk management of loss ratio security. The insurer′s loss ratio consists of the following calculation:

      Premium revenue

      Minus administrative...

    • 5. Corporate Governance
      (pp. 139-171)

      Corporate governance mechanisms respond to and shape the moral risks of insurance relationships. They are designed to make each component of the insurance system self-governing. In this chapter, we examine four corporate governance mechanisms that intersect to foster self-governance. First, state regulators are active participants in corporate governance. They not only conduct audits and enforce rules, but also work on subtle dimensions of corporate culture to cultivate moral responsibility. In turn, the state′s agents are governed by insurance company officials as they participate in the regulatory process. Second, industry associations have their own governance system. This system manages collective risks...

    • 6. Market Misconduct
      (pp. 172-222)

      There is widespread and systemic market misconduct in the insurance sales process: insurers use deceptive sales practices and rely upon consumer ignorance in order to sell insurance products that are more profitable but do not suit the consumer′s needs. Such practices are especially pervasive in the life insurance industry, and our analysis in this chapter consequently focuses on this industry in particular. We initially examine manipulative sales practices that disadvantage the consumer. We then explain these practices in terms of the structure and culture of the insurance industry. Finally, we consider the various governance mechanisms through which the industry tries...

  7. PART III: GOVERNING THE INSURED

    • 7. Prospects as Suspects
      (pp. 225-266)

      Underwriters approach insurance applicants with suspicion. They assume all applicants bear moral risks that must be considered in the decision to insure and in the calculus of rating criteria to include in the insurance contract. As a result, applicants are required to report intimate details that lead to their placement in a category of suspicion that appears insurable. This approach ′in effect promotes suspicion to the dignified scientific rank of a calculus of probabilities. To be suspected, it is no longer necessary to manifest symptoms of dangerousness or abnormality, it is enough to display whatever characteristics specialists responsible for the...

    • 8. Agents of Prevention
      (pp. 267-310)

      The insurance system requires each insured to govern her own risky environment and secure it against loss. Ideally, if each insured is reflexive about risks and makes rational choices to minimize them, there will be security for all. This security will materialize not only in a safer environment, but also in a better loss ratio for the insurer and lower premiums for the insured.

      We again focus on automobile insurance and property insurance. Automobile insurance addresses a broad spectrum of risks and fields of insurance: catastrophe, property damage, crime, personal injury, disability, and wider aspects of health and well-being. It...

    • 9. Claims of Fraud
      (pp. 311-358)

      The insured are treated as moral risks in all facets of the insurance relationship. In chapter 7 we revealed that, at the point of underwriting, insurance prospects are treated as suspects and subject to investigations that place them into a particular market segment. In chapter 8, we explored the ways in which insurance makes the insured become agents of prevention, and as such always suspected of not doing enough to minimize risks on behalf of insurers. In this chapter, we turn our attention to the claims process.

      When the insured make claims, they are always suspected of exaggerating their losses...

  8. Conclusions
    (pp. 359-376)

    Insurance is a core institution in governing modern societies. It has become increasingly significant because contemporary societies encourage a minimal state and governance based on local knowledge of risk.

    As we argued in chapter 1, the state has three dimensions: it is a country with bounded territory, a nation with a population of citizens, and a sovereign authority with a political regime. The contemporary state is minimalized as it gives ground to, and partners with, private sector institutions on each of these dimensions. It becomes one institution among others, trying to act for the general interest according to principles of...

  9. References
    (pp. 377-390)
  10. Index
    (pp. 391-414)