My wife and I were watching Guy Ritchie’s “Sherlock Holmes” (2009) last night. There is a chase/fight scene where a large commercial ship being repaired along a dock is detroyed as collateral damage. She asked me “What are the consequences of that ship being destroyed?” I had to admit that I didn’t fully know the state of the insurance market in Victorian England, but suffice it to say a few businesses and/or families were likely ruined. Which led to a conversation about collateral damage outside of the main narrative in movies and insurance. Sorry, that’s just what happens when you marry an economist. Things to consider the next time you’re filtering your prospects.
Which got me thinking: how much does the suspension of our disapproval of the protagonist’s actions (similar to the suspension of disbelief) depend on our undeclared faith in the insurance market of a fictional world? We don’t worry about destroyed livelihoods because we assume everything is simply absorbed as a tail event against which everything is insured. Car through front window? Automotive insurance tail event. Plane crashing onto the Vegas strip? Aeronautical tail event. Godzilla’s tail sweeping through a city? Giant lizard tail tail event.
How about the rise of the antihero? How many heists include a character shouting exposition to a crowd of cowering bank customers that they are there to steal money from the insurance company rather than the customers? The filmmaker needs the audience to suspend disbelief that bank’s have multiple customers inside in the age smart phones and suspend disapproval of the morality of the thieves’ actions as they steal from what they can only hope the audience will deem a souless corporation that can absorb the loss without broader consequence.
There’s two intellectual rabbit holes you can go down when you start thinking about insurance. You can dive in vertically, asking how much of our daily lives, including the consumption of narratives, is dependent on the presumption of insurance. You can also start thinking horizontally: how many dimensions of our lives boil down to creating formal and informal sources of insurance. We acquire formal health, home, pet, and automotive insurance. We also join groups, like churches, synagogues, mosques, and (yes) cults for social insurance. One motive to have children is to insure against the limitations and isolation of old age. Anything and everything we invest in, both individually and as a society, that softens the tail events at the expense of the expected outcome is a form of insurance.
It can go on and on. If anything, it takes care at some point to stop seeing everything as a form of insurance. Why did they feature an actor in the poster and the trailer despite their only appearing for 14 minutes in the film? Why were they paid more than double the lead actors? Oh, right. They’re an insurance policy against a catastrophic opening weekend. If the movie is good, but needs word of mouth to spread for people to starting coming out, you need to survive to a second weekend to start making money. Better to eat a chunk of your expected profits on a big name than risk getting dumped from theaters before the audience can find you.
What’s that you say? No one goes to theater’s anymore? Oh. Well, there’s some risk you can’t insure against.
Economist Writing Every Day 