Friday, April 23, 2010

Legal insurance for NSETs?

Roboseyo has a must-read post that highlights what could be a very good idea: W20,000 per month assurance (read: "insurance") from Kangnam Labor Law Firm that could cover much of the initial high cost of going to court (or other legal matter, I suppose) for English teachers (and others?). If this is the work of ATEK, my hat is off to them for doing something very worthwhile.

As I mentioned at Roboseyo's blog (and the rest of this is a slightly edited version of a comment I left there), I think this is an excellent idea, and I think Roboseyo did a good job of recognizing and discussing some potential problems with such a system, particularly in its pilot stages. I'm a pragmatic optimist, however, and I think that all of those problems are fixable with some fine-tuning and tweaking.

The biggest problem is that by having voluntary (versus mandatory) insurance, an insurance provider runs the risk of a form of adverse selection. Basically, those with a propensity to sue and those who perceive themselves as having a greater likelihood of needing to sue will seek out this kind of insurance. If the insurance provider (i.e., Kangnam) takes all comers, they may end up with a lot of high-maintenance customers that cost the firm more than they take in through premiums.

Spreading the risk amongst a more "normal" population is what needs to be done. That is, try to get as many people who might need the service at some point but likely won't. I believe this could be done by ATEK upping the cost of its own membership by the amount of the insurance (suggested as W20,000) and offering it as a package (W20,000 for the insurance and W10,000 (right?) for the membership).

Of course, this would discourage membership among those who feel they don't need the insurance, but it might encourage membership among others, especially if a packaged savings is only available as part of ATEK. For the former, an assurance-free ATEK membership option could be available: W15,000 for membership instead of the current W10,000, so that getting the two would be a bargain. As well, the law firm should charge W25,000 for the assurance alone, not W20,000. I think this would boost both ATEK membership and assurance enrollment, both good outcomes.

Another problem, as Roboseyo mentioned, is that there would be greater usage of legal services, perhaps more than is being covered by the assurance premiums of W20,000 or W25,000. This would be for two reasons, the first of which would flatten itself out over time. That is, there is pent-up demand for legal services that would find release in this new system. Eventually, though, as these pent-up cases are dealt with or play out, the demand for services will flatten to a "normal" level.

The second problem, though, is one that plagues insurance plans whether they be nearly all private, like pre-Obamacare US or nearly all public: People are more likely to use something if they are shielded from its more expensive true cost. Right now people who want to sue are curtailed by the high cost (W600,000), but if it costs nearly nothing, they are more likely to go and do it. Perhaps a gatekeeper role will have to be performed by ATEK or some objective third party, someone deciding — hopefully with some criteria — if a case has merit and a reasonable chance at success in litigation or arbitration.

Of course, that will give us NSETs whose cases are rejected screaming bloody murder on their blogs and, as some disgruntled folks are wont to do, trying to take down the system through badmouthing or worse, perhaps even death threats purportedly from others (I kid! I kid!).

The problem is finding that happy medium between the two ends of the spectrum: having legal services so cheap that people will use them even for frivolous or unlikely cases on the one hand, and, on the other end, having them so expensive that those with a genuine need and whose cases may effect real change are unable to get legal care.

And that brings me to another point that may actually help things along: If this assurance-providing law firm starts getting good at such services, they may actually have the effect of reducing demand for their services or their workload for each case. That is, they might end up creating a network of connections that would include, say, government officials who will go to bat for them or are at least familiarized with their type of cases, or they might end up developing a skill set such that a few phone calls to hagwon owners or school principals gets cases resolved.

We shall see.

I just hope this doesn't get mucked up with overly high expectations, miserly cheapness from people who want services they haven't been properly paying into, and bruised egos trying to ruin things for everyone else. Not that anything like that has ever happened before.

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3 comments:

  1. I wonder if anyone involved in this bothered to consider that insurance is a regulated business... There are already competing -- well, not competing for English-teacher custom, but still... -- "legal expense" insurance products available from Korea's licensed insurance companies. Seems to be asking for trouble, if you ask me.

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  2. Those kinds of details might be part of the reason this is starting out in limited trial, Brendon.

    Thanks for the response, Kushibo.

    Rob

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  3. By the way, miserly cheapness and shrill demands are the sum total of my 14 years' experience fielding calls from English teachers.

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