Could insurance be a solution to scams? Workers' Party MP, Jamus Lim suggested that as an extension of his idea to burden businesses with the bulk of the cost of the crime.
I'm quite surprised that as a trained economist he doesn't understand that it would not change a thing – and end up costing the entire country more, not less.
The only people it would guarantee payouts to are... criminals (again!).
Insurance is only a means of distributing risk – it doesn't solve the underlying problem. Secondly, it rarely (if ever) covers self-inflicted harm – so a large portion of scam victims would not be covered, unless he believes it should be compulsory regardless of the circumstances.
You may have a fire insurance but if you set your house ablaze your insurance company won't pay out. So, I don't think consciously sending money to a stranger you met on WhatsApp would qualify either.
What's worse, the costs would likely quickly spiral out of control.
We've invented insurance as protection against unlikely but potentially severe events. It makes sense if many people pay a little bit into a big pool of money so that the occasional unfortunate victim is entitled to as much support as they need - and it can be any of us.
The size of that pool is determined by the statistical incidence of such events. I.e. a predictable number of people die, get injured, are victim to a house fire or a car accident and so on.
If we could eradicate fires, car crashes and health incidents, insurance would be useless – but we can't, so it's the next best thing.
However, by providing insurance from scams we would still be incentivising irresponsible behaviours. It's not like theft – we may be insured from burglaries but we still don't leave the door open.
Digital crime is not quite as tangible – and often misleads people with promises of great rewards. Many would take greater risks in the hope of multiplying their funds, knowing that they can't lose the money.
Ain't that the perfect gamble!?
"Send me $10k I'll send you back $100k, promise!" High rewards without any risk. Who wouldn't take it?
Money lost to scams already amounted to $660 million in 2022 – but the figure keeps growing.
This is an average of about $200 per each Singaporean resident over the age of 20. I'd love to see how many locals would be willing to pay $250-300 for a scam insurance every year (since insurance companies have to make a profit, after all).
That figure would quickly grow as people become more reckless.
Even if it was just a cost to banks rather than individuals, do you think they would just take it lying down and not pass it on to customers in some way?
This could easily snowball to $500 or maybe even $1000 per pax within a few years - this is how much each Singaporean would be losing due to scams.
As I said, an insurance scheme would really only benefit criminals. Yes, it would provide a safety net for those who got duped – at the expense of everybody else.
It's not a solution to the problem – it's a way to entrench it.
