[SystemSafety] How far does insurance economic incentive push safety?

[Phil Koopman]

I'm looking for opinions and previous work regarding the proposition 
that insurance premium economic pressure -- all by itself -- is likely 
to result in an ALARP or similar safety outcome for life critical 
systems (trains, planes, automobiles, etc.) in the absence of regulation 
or any other safety pressure. Details below if this is of interest.

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I am interested in the relationship between economic pressure from 
insurance premiums and safety outcomes.  I realize these things are 
messy, there are multiple factors in practice, "it all depends," and 
that regulation to some degree puts its thumb on the scale (some domains 
more than others), so I understand this is something of a theoretical 
exercise.

I'd expect some correlation. In particular I'd think that as a 
generality improving safety will over the long term yield lower 
insurance premiums (assuming an efficient competitive market, not 
worrying about negotiating power imbalance between individual consumers 
and insurance providers, etc.). I'm aware there are complications such 
as expensive crash protection consumables that are damaged in the course 
of reducing harm severity that can push back against this correlation. 
And I'm aware of liability issues, but let's say insurance ultimately 
pays out for those too.  And "self-insurance" counts as insurance.

The pointed question of interest is whether there is a reason to believe 
that insurance premium economic pressure, all by itself, is likely to 
lead to acceptable safety for life critical systems.

My initial position is that I'd be surprised if insurance premiums alone 
(with no regulation) necessarily result in an ALARP result for typical 
modes of transportation. I'd expect they'd prevent a really horrible 
result, but not necessarily safety I'd want to have in transportation 
I'm personally going to use.

Among other reasons, if insurance premiums resulted in ALARP, I'd expect 
we wouldn't need regulators (which we do need in practice).

But perhaps I'm wrong.  Or perhaps insurance economics driving ALARP 
is 
true in theory but not in practice for reasons that are interesting.

Does anyone know of a good treatment of this topic?

Thanks,
-- Phil

-- 
Prof. Phil Koopman   koopman at cmu.edu
(he/him/his)         https://users.ece.cmu.edu/~koopman/