Insurance in a world with Superheroes

Question

The less likely an event is, the easier it is to insure against it, as the risk is low. Meteor insurance, if it exists, is probably cheap, and still pretty profitable for the company, as the number of claims would be low.

On the other hand, the odds of your car being damaged in a fight between superheroes and villains in a major city where both are numerous is possibly much higher. Higher risk equals higher premiums, and possibly refusal to cover such events.

This leads me to suspect that various forms of insurance are either outrageously expensive in Metropolis, etc, or that certain events are not covered. They've addressed on Supergirl that "destruction by alien armada" is not covered in a many homeowner policies.

So how could protection from said events work in such a world? Why would anyone choose to live or work in a city where such destruction is commonplace? The chances of being wiped out are far from zero.

The top two scenarios I can think of both involve government involvement: subsidized premiums, and a massive expansion of FEMA or similar organizations.

There's a chance that teams like the JLA/Avengers have a private fund to help defray such costs as well.

What other scenarios can you think of to make working and living anywhere near these centers of periodic disaster anything less than economic suicide?

Answer 1

Marvel

In Marvel, there is a superhero team who's role is basically "clean up after the mess". Damage Control is a group of supers and civilians who are paid to clean up the mess and rebuild and fast. They apparently have an insurance arm as well, and superhero insurance is definitely a thing in the Marvel Verse. Marvel also benefits from the fact that most of the action is located in NYC, so it's probably a law passed to ensure buildings are insured against this, and within the recent story-line, the U.S. made it a law to register superheroes in exchange for legal protections and reimbursement for damages to property in pursuit of a bad guy. Runaways comics shows us that out in L.A. the Supervillain attacks are seen as an "East Coast thing" among L.A. residents (and the Supervillains steer clear of L.A. because an organized Supervillain gang controls that territory and put the fear of God into even the Kingpin!).

D.C.

In D.C., it's generally seen that the JLA does do a lot of work to rebuild communities they break and some villains will do this too... for public approval. Lex Luthor and Bruce Wayne have public works projects to pick up damages for communities hit by these devastations. Obviously the former is generally met with suspicion by the heroes in the story, while the later is the primary funder of the Justice Leagues' cool toys, so naturally, Bruce has legitimate money going to side projects. At various times, it's often shown that the Justice League is all hands on deck when major damage is done to cities by their efforts to stop super-crime. Given that JLA members are generally more powerful than Avengers members, they tend to be the best at building things better than they were. There was one comic where Superman and Doomsday were fighting in down-town Smallville, the next issue picked up after Doomsday's defeat with the JLA on hand to build Smallville back up. Though the entire Superhero community of DC seems to have mad respect for Ma and Pa Kent. Over the years Superman wasn't the only superhero they couple has cared for, and Bruce Wayne is often seen as almost their adopted child.

This is also seen in shows like Justice League and JLU where the former usually featured 3-4 members of the 7 regular characters, and explained the others away as responding to emergencies elsewhere that were more natural disasters than actual superhuman. One episode even mocked this by explaining they couldn't dispatch Superman as he was handling Earthquake stuff in California, only for the Man of Steel to swoop in and block some more fragile member of the team from a devastating attack ("It was only a 4.0").

JLU would frequently show the heroes doing first responder styled work in the background during the conclusion of the episodes actions, or coming onto or off of shifts in the expanded Justice League. At least three episodes put these styles of missions as front and center, rather than background effects.

"The Greatest Story Never Told"'s central crisis is a deadly villain is on the attack and it requires as many heroes as can be mustered to fight, as told from the point of view of the heroes who were told they needed to do crowd control. It's widely considered one of their best episodes.

"The Doomsday Sanction" starts out as the Justice League assisting a Caribbean Island Nation in an evacuation as the local volcano is about to erupt, the real threat comes from the fact that Doomsday was accidentally released by the season's bad guys and single mindedly wanted to get his revenge on Superman, who was in the heart of the volcano trying to take pressure off so it wouldn't erupt.

"Flashpoint" was an entire episode dealing with the league doing some soul searching after a security breach knocks out power to their HQ and uses some of their own tech to absolutely devastate a community. The survivors are given some focus and the U.S. Government is showing some serious scrutiny of the League's culpability in the affair (though the President does recognize that the League has saved the world more times than he can count and are currently assisting in fixing the most immediate problem).

In fiction, these types of stories are generally not explored because it's boring, though anytime your superhero story starts exploring the need for heroes to unmask themselves, it results in this topic coming up.

Will Smith Movie Hancock did point out that Hancock's help does more harm than help, though one of the people Hancock saves is a PR guy and realizes that the devastation was inconvenient, but nobody was actually killed.

Pixar's Incredible works the public disgust at the aftermath into the setting with the public all but suing Supers into illegality (though IRL, courts do recognize that Life over Limb is preferable in a rescue situation, that is, if it's between breaking your arm or letting you die, a first responder should never let you die).

Similarly, the Captain America: Civil War film was about how do the Superheroes of the MCU account for the aftermath of there films (incidentally, it takes strong cues from the comic book government licensing system).

If this issue is not the crux of the work, in a more dramatic work, expect it to cause a lot of grief to the hero (and is critical to the themes of Spider-man) or is handled in a joking fashion (ala the entire concept of Damage Control, which is generally a humor series when it is in print or an aside gag in other titles in Marvel).

Answer 2

Depending on how pervasive super powers are in society, if here are super fights resulting in super destruction, it would also make sense if there was super construction. That is, not all super powers will be applied to fighting battles. There will likely be a large number of superpowers working in industry or the public sector that would make reconstruction much more efficient. This would drive down costs of reconstruction and insurance making it more feasible for cities.

Answer 3

I would expect that there would be multiple levels of insurance, both at public and private risk.

There would be a national, FEMA like agency for large disasters, as there is now. This agency would be funded by the confiscation and liquidation of villainous assets to bring down the cost.

Then, there would be insurance for the cities themselves, probably funded by a combination of local taxes and asset forfeiture.

Private insurance for corporations and individuals would be under the same risk-management as today. I imagine that the Daily Planet and Star Labs would have much higher rates than Bud's Suds, for example.

Answer 4

I don't think it would work like indemnity insurance today, and the overwhelmingly likely result is just that a large amount of productive activity (relative to modern reality) would be dedicated to servicing the damage without insurance markets. A government agency might do it, as might superhero groups, but I think it's unlikely.

Government is the natural party to pool risk for people, but the risk would be very unevenly distributed-- Metropolis is at more risk than Nowhere, Wyoming. And since the risk, where it exists, would be pretty high (lots of damage), the costs would be high as well. People already complain about federal payments after hurricanes operating as subsidies encouraging people to live in predictably dangerous areas, and I imagine this would be even more intense in areas with even greater destruction. It might happen anyways, but the expense would be high and would probably distort other government spending pretty severely.

But even with broad pooling of risk, it's definitely possible that the costs are so high that the risk is simply not insurable (if people can't pay the actuarial-ly sound rates, then they won't be able to participate, and the insurers will not be able to operate).

As for superheroes, covering the damage sounds like something that they might do. But where would they get the money? Unless they start charging for services (which seems... problematic, at best), I doubt they can foot the bill for the carnage.

I think that what we'd see instead is a marked decrease in people's investments in the sorts of property that would be at risk. Real estate prices would drop, as they would become much riskier to own in higher-risk areas. Rents might increase, as property owners start to discount the value of buildings into the future. Car prices would plummet, or at least people would prefer owning cheaper cars. Private ownership might dissolve in metro areas, with people only using other ways to get around.

High-end markets would still exist, but almost exclusively for people wealthy enough that they could self-insure against the losses. Investment portfolios would feature relatively less real estate, and loans using real property or cars wouldn't be worth as much. It would become less valuable to live in cities (or any region, really) where super-beings were active, and so less people would bother to do so.

Property at risk from this kind of collateral damage would just be less desirable, and insurance would either be very expensive and relatively rare for individuals to carry.

Answer 5

Much like tornadoes, hurricanes, and forest fires, the endless destruction that heroes and villains inflict upon the cities they call home is so far out of human control and so expensive to fix that insurance companies will simply not offer to cover it. Real-world super fights would fall more under 'national disaster' than 'insurance claim'.

If real-world superheroes caused the kind of frequent destruction in comics and movies, insurance companies would certainly add a superhero-focused Act of God clause to their insurance packages. Since most heroes and villains seem to stick to one city and rarely leave it, the insurance companies would have a pretty easy time arguing that the liability of toppled skyscrapers lies mainly on the people who keep rebuilding them every month.

Since each fight would be months or years of recovery and heroes/villains don't like waiting that long, normal insurance and construction companies simply could not keep up with the costs of rebuilding efforts.

However, this does leave the door wide-open for a super-insurance agency with heroes that specialize in cheap and quick urban construction...

Answer 6

Destruction means change and where there's change, there's money.

Real estate becomes a gamble when there are massive destructive powers in the area. Who knows how long a building will last? As such, realtors begin literally gambling. If I'm looking for a nice plot of land in the middle of the city for my new office building, I can find a building I already like and make them a deal: I'll pay them some chunk of money every month if they promise to sell me the land and whatever's on it for some set price when the building is destroyed. Think of this as "shorting" the building--you're betting on it to (quite literally) crash.

What qualifies as "destroyed" is left for the people writing the contracts to duke out--maybe it means repairs are appraised at a price higher than X or some other objective measurement. But a smart realtor with an eye for where the super hero fights will take place stands to make a lot of money by buying and flipping cheap land.

After seeing a few realtors become filthy rich off of this, hoards of them jump on the boat. If you have a building in the city, chances are high that someone's paying you monthly for the chance to take it for cheap if a super hero attack comes. The monthly payments combined with the government incentives and heroes' pity payments are usually enough to fund your rebuilding effort. And the money the government and heroes are throwing at the situation along with all of the wealthy realtors makes the city teem with money and all of the people who come with it.

The city is a high-risk high-reward game and the rush of playing is only coupled with the rush of living so close to the constant epic fights you get a front row seat to.

Answer 7

Acts of God

In places were acts of god are quite frequent, they legislate protective measures, largely because the insurance companies won't insure anything less, and the government does not wish to pay out more in the event of a catastrophe. Individuals and business would also willingly install/have certain protective measures in order to reduce insurance costs.

I know that North Australians specifically build houses with cyclone bolts. A certain minimum of these are required by law to be permitted to build there, but many individuals/business will add extra bolts than required even though they are expensive. It acts to hedge their investment in the building both in terms of insurance, but also because it makes the building less likely to fall apart when damaged.

Acts of Demi-Gods

I imagine that those super-hero fights would pose certain risks, whatever those risks are, are what is going to be improved. The insurance companies will identify those risks and raise their prices, the people/businesses will complain, and the state will legislate/pressure the insurance companies to reduce their prices.

If the city saw lots of vehicle damage, the state or insurance companies might mandate that car parking happens off-road, or the car is not insured. The state would work with the city to under-ground or otherwise shift parking, maybe even focusing on public transit more. If it were still too risky, those off-road car parks might need even more measures, like being underground.

If the building were continually being damaged, perhaps the state would legislate armour plating on buildings which house X+ people, for their safety as much as anything else. Other structural qualities such as several strong cores in sky scrappers, or perhaps a crumple zone s as to minimise structural damage.

Perhaps certain social activities might be implemented, such as a fight avoidance system. When a fight is detected people are warned by text-message to avoid/seek shelter. That at least would reduce mobile collateral damage.

Eventually the risks would be reduced, and with that the insurance premiums would reduce, though probably still be relatively high. If the city is prosperous enough this would work, otherwise the city would become abandoned. Then another city would get the problem.

Answer 8

The less likely an event is, the easier it is to insure against it, as the risk is low.

This is simply not true. Insurance works best when an event is individually unlikely but occurrence is likely among the insured group. I.e. where at least one person per year will be able to make a claim. If the event is less likely than that, then there will be a natural tendency for the insurance company to keep insufficient money. Or to simply not offer coverage, as who wants to insure against meteors? This is why Lloyds of London operated. They put actual people as the guarantors of unlikely possibilities to guard against insufficient savings.

Consider the possibility that a superpowered individual destroys every building on the entire world. That's low risk. There's not many powers that can do that without killing all the people. Less likely than almost anything. But if it happened, insurance companies would be completely unable to cope. They just don't have enough money to replace every building in the world at once.

Now, if there is a one in a million chance of any particular building being destroyed, insurance companies can handle that. Because if there are a billion buildings, that means that only a thousand are destroyed per year. And each one of those has people paying premiums for a million other buildings that weren't destroyed. Not everyone pays the premiums? Then some of the thousand buildings are likely to be uncovered as well.

There is essentially a sweet spot for risk. Groceries are not well subject to insurance, because the risk that you will want to eat next week is almost 100% (you could develop anorexia or die, so only almost). It's cheaper to buy direct than to pay insurance overhead to buy. But neither is that one in a trillion chance. Either the cost is so low that it's not worth insuring, or it's so expensive when it occurs that no insurance company can afford to cover it. A nice one in a hundred chance is insurable. It happens often enough that you don't want to be the one but not so often that you have to prepare for it regardless.

Government intervention

So what happens with real cataclysms? We call these tornadoes, hurricanes, etc. They are unlikely, but when they happen, they tend to happen in large groups. They aren't likely enough for insurance premiums to cover costs. So most insurance policies exclude them. Instead, the government declares an emergency, FEMA swoops in and pays claims. Presumably the government would also do this with large superpowered events. But this is unlikely to cover smaller, more common events.

Insurance

If a superhero accidentally totals one car a day in New York City, then insurance would just cover that. Yes, it would increase premiums. But not by as much as you might think. There are about 2.5 million cars in New York City. The average car insurance is about \$3 a day (50% higher than the national average). So that's \$7.5 million a day. Add a \$50k car to that and it's still about \$7.5 million.

And let's compare that average to the average in Brooklyn. There, the average premium is \$5-6 a day, almost double that of the city as a whole (three times the national average). Why does Brooklyn have more expensive insurance than the city as a whole? Perhaps cars are more expensive. Or Brooklyn is more dangerous.

People in big cities already pay higher insurance premiums. Metropolis only has one Superman. There's a limit to the amount of damage he could do most days. And of course, sometimes he prevents damage that would have otherwise occurred (e.g. he saves a car from being totaled in an accident). Unless there is a really big event, insurance covers the occasional totaled car or whatever with a modest premium bump.