Actuaries to the rescue? A market-based solution to an externality problem

I promise I'll go back to our regularly scheduled program of topics that are non-gun related soon enough (sneak preview: coming soon will be topics on the economics of the star wars 'death star', state tax subsidies and their effect on business, and an interesting new pricing strategy for drinks in bars), but I ran across a kind of brilliant market-based solution that might bypass some of the trickier gun control issues.  So at least this version of gun control policy is in an area I actually know something about and is more of a standard economic solution to a problem. In a post similarly titled to my earlier post over the weekend, the author presents her son's idea:

First of all, this isn't my idea. It's my oldest son's, and he told me about it a few years ago when he was trying to figure out a way he could make money. (Did I mention the kid is a genius? If you use this idea, you owe him.)

He said it made more sense to sidestep the entire gun control controversy and instead pass state laws that require anyone who owns a gun to carry insurance. If they have risk factors (like teenagers in the house), their rates go up. If one of their kids sneaks a gun out of the house and gets caught, or uses it to commit a crime, the insurance gets canceled for some meaningful period of time -- say, 10 years. And if someone steals your gun and you don't report it in a 24-hour window of you finding out, your insurance is suspended for a long time.

If you have a rifle and it's only used for hunting, low rates. If you have a Glock and you carry it in an open-carry town or state, your rates will be very high -- because odds are so much higher that innocent bystanders may get caught in a shootout or be victims of an accident.  The more training and safety classes you take, the cheaper the premium.  If you've ever been convicted of domestic abuse or are the target of a protection order, you are not eligible for insurance.

Homeowners could be required to carry gun insurance as long as they're still paying on a mortgage, because a gun accident or misuse could result in a large legal judgment against the house. Oh yeah, and you have to buy coverage for each gun you own.

 I have to say ... I kind of like this compromise  (particularly if it were combined with some increased assault weapon restrictions) although I'm not totally sold.  It still allows for some freedom of choice, but comes closer to internalizing some of the negative externalities (read my earlier post on externalities if you need a refresher course on the topic) that are currently going unaccounted for in the gun market. Given the potentially high liability costs, it seems likely that insurance would be costly enough to have a fairly significant impact on the decision to own firearms.  I'm not sure it's the perfect answer, but as 'Morning Joe' said today we need to stop letting "perfect" be the enemy of "good" and I think everything should be on the table right now to reach a reasonable solution.  I'm sure people will trot out all the usual "criminals won't buy insurance" claims, but I think that has been a Straw-man for too long.  This would be a step in the right direction potentially.  Worth thinking about anyway.

Plus it would give my actuarial friends a whole new market to test their skillz on (and yes, actuarial skills are spelled with a zzzzzz). ;)