INSURANCE, RISK AND RESPONSIBILITY: TOWARD A NEW PARADIGM?

INSURANCE, RISK AND RESPONSIBILITY: TOWARD A NEW PARADIGM?
Conference Report and Introduction
Tom Baker [FNa1]

Copyright © 1999 Connecticut Insurance Law Journal Association; Tom Baker

In April 1999, the Insurance Law Center at the University of Connecticut School of Law hosted a conference on "Insurance, Risk and Responsibility: Toward a New Paradigm?" The call for papers described the conference as follows:
For most of the 20th century, insurance in the United States expanded dramatically. On the private side, the 20th century witnessed the creation of automobile and health insurance, workers compensation, and private pensions, as well as growth in older forms of insurance such as life, liability, property and disability insurance. On the public side, this century witnessed the creation of an entirely new social insurance sector, beginning with the New Deal and followed by Medicare, Medicaid, and natural disaster insurance, as well as a host of ventures directed at business risks. Indeed, "more insurance for more people" is as good a sound bite as any summing up domestic social policy well into the Reagan/Bush years.
A series of developments suggests that this policy may be on the wane. These include:
• A shift of investment risk to consumers in return for the possibility of greater return in life insurance, annuities and pensions, including, possibly, a partial shift from a "defined benefit" to a "defined contribution" approach to U.S. Social Security retirement benefits;
• The failure of universal health insurance, a decline in health insurance participation, and the emergence of a "defined contribution" approach to employment-based health care;
•*II . The development and growth of alternative risk mechanisms such as captive insurance, third party administrators, catastrophe bonds, and finite risk insurance, and a trend toward larger deductibles, self insured retentions, and retroactive premiums among the entities that continue to use traditional insurance; and
• An increased focus on the need to manage incentives to curtail the growth of public and private insurance programs.

Significantly, these developments are occurring in both public and private forms of insurance, so that they cannot be attributed solely to a reexamination of the role of government.
At the same time, however, the vocabulary of risk has moved well beyond insurance institutions. Money managers develop portfolios at the risk, reward frontier. Social service agencies track at risk children. Community policing efforts are targeted at high-risk areas. Extreme sports enthusiasts rate climbs according to risk and climbers according to the risks they are qualified to take. Judges and law reformers debate accident law in terms of the allocation and spreading of risk. And some have suggested that all of the civil law and the administrative state is now directed at the allocation and management of risk. Thus, if we understand risk management as an insurance technology, we might challenge the apparent decline of "more insurance for more people." Perhaps more insurance - of a certain kind - continues to be pressed upon more people, even as the risk assumed by traditional insurance institutions shrinks.

Participants at the conference included law professors, historians, sociologists, philosophers and economists. Many of the participants had been meeting regularly since 1997 as the New England Insurance and Society Study Group, an informal faculty study group sponsored by the Insurance Law Center. Others had written significant books or monographs relating to risk and insurance that came to the attention of the Study Group. The conference featured seven panels, each addressing different aspects of the history and present of what we came to describe as the "embrace of risk." *III Many of the papers will appear shortly as chapters in the book Embracing Risk, edited by Tom Baker and Jonathan Simon. Several were adaptations of recently, or about-to-be, published books. [FN1]

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This issue of the Connecticut Insurance Law Journal features three articles that were among the highlights of the conference: "Insurance: How it Matters as Psychological Fact and Political Metaphor," by Thomas Morawetz; "Moral Opportunity and the Politics of Insurance," by Deborah Stone; and "The Return of the Crafty Genius: An Outline of a Philosophy of Precaution," by François Ewald.

These articles continue the Journal's tradition of pushing the boundaries of what it means to be an insurance law journal. From Seth Chandler's analysis of the economics of moral hazard in the first issue of the Journal [FN2] through Pat O'Malley's use of industrial life insurance regulation to explore what it means to be a responsible citizen in the most recent issue, [FN3] the Journal has featured at least one significant, interdisciplinary work in every issue. [FN4] At the same time, the Journal has not neglected its core legal constituency. Each issue has also included significant doctrinal work, such as the article by *IV William Barker in this issue. In addition, beginning with Volume 4, every issue has featured Professor Jeffrey Stempel's Recent Case Developments, as well as abstracts of insurance-related articles published by non-specialty law reviews, prepared by Journal editors under the direction of Professor Jeffrey Thomas. Finally, the student notes and comments address significant recent cases and notable legislative or doctrinal developments in the field of insurance law. The goal is to provide our readers with an efficient means of tracking developments in the field of insurance law, as well as to challenge them to place insurance and insurance law in a broader perspective.

The three articles from the Risk conference each challenge our readers in different ways. The first article itself came about as a challenge. In planning the conference, we cast about for a film that would provide a break from the panel presentations and provoke a discussion on the image of insurance in popular culture. We decided on The Rainmaker and challenged Thomas Morawetz B University of Connecticut law professor, philosopher, advocate for law and literature, and connoisseur of detective novels and popular film B to comment on images of insurance in literature and film and to moderate the discussion of the film. As predicted, the film evoked strong reactions from the crowd of lawyers, law students, and insurance buffs. The result was a lively session that was one of the high points of the conference, as well as the wonderful meditation, "Insurance: How it Matters as Psychological Fact and Political Metaphor," that appears in this issue.

Our second author is Deborah Stone. She is a political scientist who writes about insurance, health care, and the political process, and she is an avid observer of the law and rhetoric of insurance. The co-founder of the New England Insurance and Society Study Group and a long time contributor to the Journal of Health Politics, Policy and Law, Stone has played an important role in conducting and promoting interdisciplinary research in the field of insurance. Her article, "Beyond Moral Hazard: Insurance As Moral Opportunity," identifies a new concept that helps explain the growth of insurance institutions. This concept, which she calls the "moral opportunity" of insurance, describes an expansionary social dynamic in insurance institutions that counters the individual-based forces of moral hazard and adverse selection that are of such concern to insurance and economic analysts. The moral opportunity of insurance is a social mechanism that tends to increase what gets perceived as insurable and deserving of collective support. Stone argues that moral opportunity is particularly strong in social insurance and that the moral opportunity of social insurance is a social and political *V dynamic that fosters progressive social policies that improve both the well being of individual citizens and the democratic health of the polity.

Our third author is François Ewald. He is a political and legal philosopher, a professor of insurance, and the director of public affairs for the French Federation of Insurance Companies. Before assuming his present positions, Ewald spent many years working with Michel Foucault. Widely published in France, the two short essays he has published in the United States [FN5] have earned him a devoted following on this side of the Atlantic as well. His article, "The Return of the Crafty Genius: An Outline of a Philosophy of Precaution," argues that Western societies are engaged in a fundamental paradigm shift in their approach to risk. If the 19th century approach to risk was characterized by ideas of providence and individual responsibility and the 20th century approach by ideas of prevention and solidarity, perhaps the late 20th and early 21st century approach to risk will be characterized by ideas of safety and precaution. Ewald describes the shift from providence/responsibility to prevention/solidarity as driven by utopian ideas about the ability of science to manage, contain and perhaps even eliminate risk. The contemporary shift to safety and precaution follows from a recognition of the limits of science. This shift challenges the idea of progress that has animated insurance (and risk management more broadly) and, perhaps, presages the end of the age of insurance.

[FNa1]. Connecticut Mutual Professor of Law; Director, Insurance Law Center, University of Connecticut School of Law; Faculty Advisor, Connecticut Insurance Law Journal.

[FN1]. See Geoffrey Clark, Betting on Lives: The Culture of Life Insurance in England, 1695-1775 (1999); Cathy Frierson, All Russia is Burning: A Cultural History of Rural Fire and Arson in Late Imperial Russia (forthcoming 2000); Michael J. Graetz and Jerry L. Mashaw, True Security: Rethinking American Social Insurance (1999).

[FN2]. See Seth Chandler, Visualizing Moral Hazard, 1 Conn. Ins. L. J. 97 (1994-95).

[FN3]. See Pat O=Malley, Imagining Insurance: Risk, Thrift and Industrial Life Insurance in Britain, 5 Conn. Ins. L. J. 675 (1998-99).

[FN4]. See Seth Chandler, The Interaction of the Tort System and Liability Insurance Regulation: Understanding Moral Hazard, 2 Conn. Ins. L. J. 91 (1996) (law and economics); John G. Day, Managed Care and the Medical Profession: Old Issues and Old Tensions, the Building Blocks of Tomorrow=s Health Care Delivery and Financing System, 3 Conn. Ins. L. J. 1 (1996-97) (law and history); Elizabeth O. Hubbart, When Worlds Collide: The Intersection of Insurance and Motion Pictures, 3 Conn. Ins. L. J. 267 (1996-97) (law and society); George M. Cohen, Legal Malpractice Insurance and Loss Prevention: A Comparative Analysis of Economic Institutions, 4 Conn. Ins. L. J. 305 (1997- 98) (law and economics); Jonathan Simon, Driving Governmentality: Automobile Accidents, Insurance, and the Challenge to the Social Order in the Inter-War Years, 1919-1941, 4 Conn. Ins. L. J. 521 (1997-98) (law and history); Jeffrey E. Thomas, An Interdisciplinary Critique of the Reasonable Expectations Doctrine, 5 Conn. Ins. L. J. 295 (1998-99) (law and psychology).

[FN5]. François Ewald, Insurance and Risk, in The Foucault Effect: Studies in Governmentality 197 (Graham Burchell et al. eds. 1991); François Ewald, Norms, Discipline, and the Law, in Law and the Order of Culture 138 (Robert Post ed., 1991).