Insurance markets in everything

by on May 4, 2010 at 1:30 pm in Economics, Law | Permalink

From Der Spiegel (in German), there is notice of a market which surprises even me.  Many Parisians ("Schwarzfahrer") don't pay to ride and Metro and risk legal fines.  For seven Euros a month, you can buy insurance against having to pay those fines.  The group also considers itself part of a protest movement for the right of free public transport.

Talk about adverse selection…  Presumably it's understood that you don't pay the fare and the relevant risk is simply how often you are caught.

For the pointer I thank Steffen Reinhold.  Ferdinando Monte sends along this English-language version.

anon May 4, 2010 at 1:36 pm

“Free rider insurance.”

Andrew May 4, 2010 at 1:40 pm

gg

j r May 4, 2010 at 1:56 pm

it is really convenient when issues of social justice just so happen to align with your own narrow interest in taking the metro for free.

Niclas Berggren May 4, 2010 at 2:06 pm

The same system exists in Stockholm: http://www.planka.nu/

anonymous May 4, 2010 at 2:28 pm

I wonder if health care reform in the US can be gamed in some similar way.

If you don’t buy health insurance, you will be fined… but apparently the collection of fines will not actually be enforced. So you can simply wait until you get sick and then sign up, because you can’t be denied for a pre-existing condition, at which point you’d presumably have to pay the accumulated fines (but no accumulated interest!).

I haven’t done the math, but perhaps someone could sell insurance for health insurance, so to speak, at a lower price than actual health insurance.

JackTrade May 4, 2010 at 3:12 pm

frank, that’s because Germans would not *dare* to ride without a proper, valid ticket. I mean to not follow the rules!? How American!

Seriously though, I know what you mean…I’ve never seen a ticket inspector in Germany. But I have a distinct suspicion that that would an encounter to avoid.

Jim May 4, 2010 at 3:31 pm

Free. Adjective. “Something that someone else pays for.”

Rahul May 4, 2010 at 3:47 pm

There was a similar group on the Mumbai suburban train system as well. All you had to do was to turn in your fine receipt to be re-reimbursed. They even went a stage further by having ticket checkers on their payroll so that if you were a part of one such group you could just reveal your identity by a secret password and then get away free. Of course, the password changed every day and the regulars knew of a certain newspaper vendor on the station to talk to to get that day’s password.

Ross Parker May 4, 2010 at 4:34 pm

The Paris Metro could halt this overnight. Offer the blackriders a free year’s travel for evidence of an insurance payout from this firm…

k May 4, 2010 at 6:21 pm

In Rome they do inspect the tickets. at least in buses.My wife and me were the only that checked the ticket in the machine. We are venezuelans. After i got down the doors closed . my wife was asked to show it. She doesnt speak italian and after a little while se showed the ticket and was allowed to get down.

t’s more risk aversion vs transaction costs of bothering to waste your time on ticket purchases.
In France you can buy bus tickets in the bus. In Italy you must go to the tabaccheria

Be May 4, 2010 at 6:54 pm

Wow. I take the
train with some regularity between one of the close suburbs and Paris and would never think of trying to jump a fare as I’m actually afraid of the metro police. They’re not very nice, to say the least. Bought the wrong ticket once (not hard to do – the ticket machines are *hell* to work) and was seriously yelled at – would have had my passport confiscated if it weren’t for a certain other ‘rapport de force’ at play in my particular situation.

From what I’ve heard, the French Metro Police work on a commission basis: the more fines you deliver, the bigger a bonus you get. There’s a certain incentive on their part to ‘catch’ folks. Would be interesting to see how the insurance addresses this particular situation (if true).

Cameron Murray May 4, 2010 at 7:51 pm

Same thing in Vienna too.

Nate May 5, 2010 at 7:54 am

Maybe my experience was unique, but I definitely encountered ticket inspectors more than once in Berlin, and I was only there a few days. Prague likewise.

Brian Smith May 5, 2010 at 8:12 am

Isn’t this conceptually similar to having legal insurance? Or any situation where Cost of Compliance > Cost of Fine * Chance of Being Caught. Merely hedging a risk.

Consumer May 5, 2010 at 10:10 am

Brian Smith has a very good point. This is very similar to the liability insurance when you are driving or the malpractice insurance US doctors have to pay for.
It’s basically an isurance against getting caught in wrongdoing.

Fish Hydrolysate May 6, 2010 at 1:04 am

If it’s safe for a life insurance company to hold a widely diversified portfolio of life insurance risks it must be OK for an individual investor to own a slice of such a widely diversified pool. The market for hit men will be booming!

Terrence June 6, 2010 at 10:44 am

This is the first time I hear about insurance against fines and I’ve been in the motorcycle insurance industry for quite a while. Mathematically, it can make sense because it’s just a matter of statistics versus cost. The insurer just has to see how many time does one get caught without having a ticket.

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