Second order effects of sub prime about to land on insurance
Apparently “the insurance industry is bracing for an increase in arson among homeowners who see setting the house afire and collecting the insurance payment as an alternative to foreclosure”. This according to the January 21 Fortune.
What an interesting example of several things: The law of unintended consequences - who anticipated that financial troubles could spill over into coverage troubles for insurers? The consequences of second order effects - that every major industry wide event will have side effects. And finally, the vital importance of having early warnings in place. If I were working in home insurance right now, you betcha I’d be both watching homeowners in a risky situation and making sure I warned them off.
Of course, the entrepreneurial angle of this is that there must be opportunities to be had in staving off these issues or helping insurers anticipate them more rapidly.
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- Posted: Tuesday, January 15, 2008
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Great response I shall be researching this topic further.
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