Insurance seems like a fairly poor tool here, since there’s a significant moral hazard effect (insurance makes people less careful about taking steps to minimize exposure), which could lead to dynamics where the price goes really high and then only the people who are most likely to attract lawsuits still take the insurance …
Actually if there were a market in this I’d expect the insurers as condition of cover to demand legible steps to reduce exposure … like not giving feedback to unsuccessful applicants.
The moral hazard effect might be reduced if insurance is approved for one proposed hiring methodology, rather than without conditions.
I’m also not thinking of it as a general market, but rather as an intervention that a deep-pocketed organization (realistically OpenPhil) could offer smaller (and thus perhaps more risk-averse) organizations.
The standard two arguments for the asymmetric risks of offering insurance are adverse selection and moral hazard. Note that these claims risk being a fully-general argument, as this will all else equal be a good argument against all insurance (and indeed is taught that way in econ textbooks), but insurance companies can just increase rates to adjust for this.
I’m sure this is also covered in the literature, but having an organization with deep pockets cover the insurance also makes your org a juicier target for lawsuits than usual, in addition to the standard arguments.
Hmm, insurance is only a good solution if the expected costs are low relative to the benefits but the variance is high and you don’t want to be exposed to that risk. Insurance is not a good solution if the expected costs are sufficiently high.
Though that said, one issue is that orgs are insufficiently capable of individually assessing risks, so if a centralized body can estimate the relevant risks and price them accordingly, orgs can decide for themselves whether it’s worth it.
Note that there is a mechanistic way of solving this by offering insurance in the case of being sued for discrimination.
Insurance seems like a fairly poor tool here, since there’s a significant moral hazard effect (insurance makes people less careful about taking steps to minimize exposure), which could lead to dynamics where the price goes really high and then only the people who are most likely to attract lawsuits still take the insurance …
Actually if there were a market in this I’d expect the insurers as condition of cover to demand legible steps to reduce exposure … like not giving feedback to unsuccessful applicants.
The moral hazard effect might be reduced if insurance is approved for one proposed hiring methodology, rather than without conditions.
I’m also not thinking of it as a general market, but rather as an intervention that a deep-pocketed organization (realistically OpenPhil) could offer smaller (and thus perhaps more risk-averse) organizations.
The standard two arguments for the asymmetric risks of offering insurance are adverse selection and moral hazard. Note that these claims risk being a fully-general argument, as this will all else equal be a good argument against all insurance (and indeed is taught that way in econ textbooks), but insurance companies can just increase rates to adjust for this.
I’m sure this is also covered in the literature, but having an organization with deep pockets cover the insurance also makes your org a juicier target for lawsuits than usual, in addition to the standard arguments.
Hmm, insurance is only a good solution if the expected costs are low relative to the benefits but the variance is high and you don’t want to be exposed to that risk. Insurance is not a good solution if the expected costs are sufficiently high.
Though that said, one issue is that orgs are insufficiently capable of individually assessing risks, so if a centralized body can estimate the relevant risks and price them accordingly, orgs can decide for themselves whether it’s worth it.