In what way or ways would it be most difficult for insurance companies to function successfully as sources of justice and defense against aggression?
Some market anarchists propose the idea of insurance companies in a stateless society as defenders against aggression ensuring a just outcome. While the insurance industry has been described as thoroughly unethical under our current system, it must be pointed out that, in many cases, the regulatory protection and subsidies handed out to the largest and most politically connected corporations have had a hand in creating this outcome. With the corruption and inherent violence of the State thrown aside, the industry would undoubtedly be more competitive than it is now, eliminating much of the inefficient service and high costs.
Beyond this basic statement, it’s necessary to anticipate what the most likely problem areas are. The most obvious potential problem comes from the additional risk and cost undertaken by the insurance company in dealing with especially obstinate losers of disputes. It’s true that an insurance company can recover the money paid out initially to a client by making agreements with the employer or bank of a losing party in a dispute. If the institutions connected to an individual do not consent to allow access to the specified monetary amount, for whatever reason, the situation becomes more difficult. While good reporting and business ostracism can be a powerful motivating force, and the unsavory reputation that would come with defending customers who are guilty of skipping out on publicly recognized judgments against them would work in the same way, it is still possible that the involved parties could continue resisting collection, for whatever reason. In such rare cases, the Tannehills argue that the use of force can then be applied to take back the property on behalf of the insurance company. I don’t have a problem with such force after all other options are exhausted, but this likely presents a high level of risk and thus will be costly for all involved. If the insurance company used excessive force, they might incur legal liability for damages over and above the debt, find that the operation has become too expensive to be justified, or lose the trust of customers. In such extreme and rare cases, the company may decide to take the loss and allow public knowledge of the delinquency to have its effects on the debtor’s business relationships and those of his associates. For larger losses where this isn’t enough, reinsurance contracts would mitigate the insurance company’s risks.
While it’s possible for a sufficiently obstinate person to avoid rightly paying damages in a stateless society, the consequences are clear and have both direct and indirect effects on important aspects of one’s life. The limits of insurance companies as protectors give way to voluntary enforcement by communities and markets. To be known as a violent or dishonest criminal would ensure heightened scrutiny by communities, defense agencies, lenders, customers, neighbors, and many others, making it harder to commit future crimes or even be connected to society. The checks on lawlessness provided by a freely competitive market in dispute resolution, freedom of choice in defense, and the threat of isolation for aggressors are harder to circumvent than a monopolistic and politicized “justice” system.