Democrats have a motto: Never let a crisis go to waste. It’s an opportunity to expand the scope and power of the state. Wars, natural disasters, and epidemics always feed Leviathan. Is that what we want, considering that the state often makes things worse, such a causing the shortage of tests for the COVID-19 virus?
Everyone but a handful of libertarians want the state to provide relief in the healthcare crisis. Currently, the federal government is offering a smorgasbord of old, failed, programs in which most of the funds are wasted or stolen. The Adam Smith Institute has a better idea for the UK government: let insurance companies handle it.
In normal circumstances when a business has an interruption it claims on its insurance and that way the business has the confidence to be able to continue. It is a disgrace that the insurance industry is washing its hands of this interruption now and the Government needs to put pressure on the industry to step up. But in the meantime the government must itself become an ‘insurer of last resort’. It did something similar with terrorism cover in 1993 after the bombing of the Baltic Exchange in London when it set up “Pool Re” and more recently with Flood Re in 2016 as the insurance industry was failing to cover for losses then. It worked with the insurers to ensure businesses were fully supported.
Few people know what a reinsurer is, but many have heard of Lloyd’s of London. Lloyd’s provides insurance for other insurance companies. The author of the Adam Smith article, Lance Forman, a former MEP for The Brexit Party, suggests that the best role for the state is to act as Lloyd’s for all business insurance in the UK. The process would be much simpler and more effective than what the federal government is currently attempting:
What the Government needs to do now urgently is set up a “COVID Business Interruption Fund” which would allow businesses to claim on a monthly basis for losses incurred and pay out with a very short turnaround i.e. days, not weeks, without the convoluted investigations typically made by insurers. Companies could submit their last set of audited accounts to show what their gross margins are and the losses and the Government should reimburse right away. The process should be simple. Once the Coronavirus subsides, businesses can later be audited to ensure the claims were fair and reasonable. Perhaps the insurance industry could supply the personnel to do these checks after the event.
The US should follow Forman’s advice. I would add that there needs to be a deductible, maybe 20%, on the insurance and employees can take a cut in pay. Many small companies won’t have purchased insurance, so the government needs to provide it for them.
The beauty of Forman’s proposal is that it keeps the market in place as much as possible with the government acting as a supporter of the market instead of pushing it aside and taking over like the thug it is.
In the minds of Democrats, this would be a wasted crisis. But fraud and waste will be less because the insurance companies already know their clients well. And Leviathan will be kept on a leash.