The moral hazards of neo-liberalism: lessons from the private insurance industry

TLDR

Recent tendencies in the private insurance industry toward increased consumer segmentation and expanded private policing of fraud are analyzed. The study critically evaluates neo‑liberal tenets of risk, governance, and responsibility through an empirical analysis of the private insurance sector. Moral hazard is redefined to encompass all parties in the insurance relationship, not just the insured. The broadened definition shows that moral hazards in private insurance provoke immoral risky behavior by insureds, insurers, and employees, intensify regulatory efforts, and highlight neo‑liberal priorities of minimal state, market fundamentalism, risk‑taking, individual responsibility, and inequality.

Abstract

The key tenets of neo-liberalism regarding risk, governance, and responsibility are critically evaluated through an empirical study of the private insurance industry. Recent tendencies in this industry towards increasing segmentation of consumers regarding risk, and towards an expansion of private policing of insurance fraud, are analysed. The definition of moral hazard is broadened to include all parties in the insurance relationship, not just the insured. Moral hazards embedded in the social organization of private insurance lead to various kinds of immoral risky behaviour by insureds, insurance companies, and their employees, and to intensified efforts to regulate this behaviour. The analysis concludes with some critical observations about the neo-liberal emphasis on minimal state, market fundamentalism, risk-taking, individual responsibility, and acceptance of inequality.