« Thought for the Day | Main | Dept. of Overcoming Confirmation Bias »

August 09, 2010

Divorce Insurance

The perfect wedding gift for the PoMo groom who has everything:

Here’s a new option for those worried they’ll end up on the wrong side of the statistics that show so many marriages ending over time: divorce insurance.

SafeGuard Guaranty Corp., an insurance start-up based in North Carolina, recently released what it’s billing as the first world’s first divorce insurance product. Here’s how its WedLock product works.

The casualty insurance is designed to provide financial assistance
in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.

Then, if you get divorced and your policy has matured (see below for the maturation rules), you would send WedLock proof of your divorce. In return, you’d receive a lump sum of cash equivalent to the amount of coverage you had purchased.

So how does the company prevent people who know they are going to get a divorce from signing up? To prevent that kind of adverse selection, the policies don’t mature until 48 months after their effective date (though people can purchase additional riders to reduce that maturity period to 36 months and to get their premiums back if they happen to divorce before the policy matures).

And what about other possible selection problems related to people with volatile relationships or a family history of divorce purchasing policies in large numbers? John A. Logan, chief executive officer of SafeGuard Guaranty, said the company has performed risk assessment and actuarial studies with this in mind. He notes that even in the worst case scenario, not all of those divorces would happen at once.

Interesting that the article mentions the adverse selection problem but says nothing about moral hazard:

Because insurance changes the costs of misfortune, and because people's choices depend on costs and benefits, insurance should change people's behavior. They should make less effort to avoid misfortune, and this change in behavior is called moral hazard. For example, if an accident costs a person $1000 but insurance pays $900, the insured person has less incentive to avoid the accident. If the accident costs the person $1000 but pays $2000, the person not only has no incentive to avoid the accident but may have an incentive to seek it out.

Sometimes moral hazard is dramatic. Fire insurance encourages arson, automobile insurance encourages accidents, and disability insurance encourages dismemberment. In a story in its December 23, 1974 issue, The Wall Street Journal reported this bizarre instance of moral hazard:

"[T]here is the macabre case of "Nub City," a small Florida town that insurance investigators decline to identify by its real name because of continuing disputes over claims. Over 50 people in the town have suffered 'accidents' involving the loss of various organs and appendages, and claims of up to $300,000 have been paid out by insurers. Their investigators are positive the maimings are self-inflicted; many witnesses to the 'accidents' are prior claimants or relatives of the victims, and one investigator notes that 'somehow they always shoot off parts they seem to need least.'"

The problem of moral hazard also affects government programs that insure people against misfortune. A variety of programs help people who suffer the misfortune of poverty. Aid to dependent children helps people who suffer the misfortune of having children to raise that they cannot financially support. Unemployment compensation pays people who suffer the misfortune of losing their jobs. Food stamps and public housing help the poor. Yet all these programs also suffer from problems of moral hazard. They increase children born out of wedlock, unemployment, and poverty.

Moral hazard is the result of maximizing behavior. A person weighs the costs and benefits of an action, and when benefits exceed costs, he takes the action. This does not mean that if a person has a building insured for $50,000 but only has a market value of $30,000, the owner will necessarily commit arson. There may be costs of violating one's moral code and of getting caught and convicted for arson. But some people put into this situation will find a way to torch the building because they do not find the cost of violating a moral code very high and they consider the chances of being caught small, and other people will be less careful about avoiding fires. Moral hazard does not require that people intentionally cause the misfortune. If they simply take fewer measures to prevent misfortune, the same outcome occurs.

Now here's the 64,000 dollar question. The everything-we-don't-like-is-misandry crowd love to go on and on about how no fault divorce has increased the divorce rate. It's an attractive theory (and one I was inclined to believe myself before I actually looked at the actual data on marriage and divorce rates over time).

The following chart shows normalized marriage and divorce rates from 1860 on:

divorcerate_over_time.jpg

Well known cautions about correlation not proving causation notwithstanding, the advent of unilateral divorce grounds (irreconcileable differences, not no fault) in the late 1960s appears to coincide with steep increases in both overall and new divorces per 1000 people. So if we were inclined to think correlation proved causation, it would appear that it was irreconcilable difference that drove divorce rates through the roof and not no fault. No fault, though popularly supposed to have increased the divorce rate, was available in only a few states in 1977 and didn't become widely available until 1983 - long after divorce rates began to rise steeply.

What's interesting to note is that the steepest increase in divorces occurs before the advent of no fault. The increase begins about 1958 and peaks about 20 years later in 1979. After no fault became widely available, both new and overall divorce rates actually declined. The data don't even show the correlation that is so often (and wrongly) used to imply causation.

Note also the peak in the marriage and divorce rates roughly corresponding to WWI and Vietnam.

I can't help wondering whether differences in the composition of marriage cohorts (age at first marriage and other demographic factors) wouldn't better explain divorce rates? As the following chart shows, the proportion of first marriages that fail during the first 25 years rose steadily from 1950 through 1979 but has fallen for couples married for the first time after 1980:

divorces by year married.jpg

This study provides some evidence that changing demographics may explain both the increase in divorce rates from 1958-1979 and the decrease in both marriages and divorces thereafter:

First, the proportion married at each age has been surprisingly stable over more than a century; the pattern in 1980, for instance, is remarkably similar to that in 1880. Second, consistent with our earlier analysis, the 1960s were unusual, reflecting not only more marriage, but earlier marriage. Third, the data for 2000 suggest a very different pattern, with marriage less prevalent among young adults, but more prevalent among those at older ages. This trend toward rising age at first marriage represents both a return to, and a departure from, earlier patterns. The return to earlier patterns is the later age at which men first marry; in 1890, the median age at which men first married was 26, declining to 23 by the mid-1950s, and then returning to 27 in 2004.

Finally (and most inconveniently for those who believe that women's lib is destroying marriage), it turns out that the proportion of college educated women who marry has been rising for decades and that such women are less likely to divorce:

Historically, women with more education have been the least likely to marry and have children, but this marriage gap has eroded as marriage and remarriage rates for women with a college degree relative to those with less education have risen.

In fact, college-educated women now marry later, have fewer children, are less likely to view marriage as "financial security," are happier in their marriages and are the least likely to divorce.

... college-educated women are the only group of women whose marriage rates in the 21st century are higher than they were at any point in the 1950s.

Sometimes, facts are inconvenient things. I used to believe that earlier marriages (at least for women) would foster lower divorce rates. I also used to believe that no fault divorce was largely responsible for the high rates of divorce we see these days. But although those beliefs were emotionally satisfying to me (since they validated my own life experience and values), they don't appear to be supported by the factual evidence on historical marriage and divorce rates.

For men who believe marriage presents an unacceptably large financial risk, divorce insurance may be the answer to their prayers. Statistically speaking, however, the best insurance against divorce for men may well be to marry later in life and choose a woman with a college education.

Can't you just hear the heads exploding?

Posted by Cassandra at August 9, 2010 06:34 AM

Trackback Pings

TrackBack URL for this entry:
http://www.villainouscompany.com/mt/mt-tb.cgi/3806

Comments

The best divorce insurance is finding all the high powered divorce attorneys, then paying them for a private consultation, and then when you get divorced, you will have saved 50% of the divorce costs simply because your wife can't hire those attorneys.

Attorney-client privileges. Lawyers can't violate that, not if they want to make moola.

Posted by: Ymarsakar at August 9, 2010 08:44 AM

I also used to believe that no fault divorce was largely responsible for the high rates of divorce we see these days.

Correlate that with welfare and the deliberate sabotage of middle class black families.

Statistically speaking, however, the best insurance against divorce for men may well be to marry later in life and choose a woman with a college education.

The question is, are highly educated and moderately wealthy liberal castes more likely to divorce than conservatives of the same wealth tier?

Posted by: Ymarsakar at August 9, 2010 08:48 AM

In looking at very wealthy sectors, conservatives are split half and half. You have Ryan and Newt, up against Sarah Palin and Bush. But Democrats like FDR, JFK, Clinton, and Spitzer, don't get divorced. There's no split there for high caste Democrats, like you see with high caste Republicans.

Democrats know how to horde and combine wealth. They just tend to be a little stingy in letting the poor get the same benefits of marriage.

Oh, I almost forgot John Kerry. Whose wife inherited some kind of mega bucks from a conservative businessman. They aren't divorced either.

Posted by: Ymarsakar at August 9, 2010 08:50 AM

http://comments.americanthinker.com/read/42323/645858.html

Oh yea, we can't forget about this crucial factor. When sleeping with the enemy isn't enough for a marriage?

Posted by: Ymarsakar at August 9, 2010 09:34 AM

Liberal Democrats hoard their money and spend yours.

Posted by: Cricket at August 9, 2010 09:36 AM

Cricket, it was much more honest back in the past when Democrat plantations owners owned slaves as property and aristocrats owned the land the serfs worked on and the serfs as well.

At least then, nobody was "pretending" that the oligarchy of ruling elites had anybody else's interests in mind.

Honest enemies were always better than the backstabber pretending to be your friend and savior.

We're from the ATF, Koresh, we're here to help you like I did with Ruby Ridge.

Posted by: Ymarsakar at August 9, 2010 09:44 AM

I wonder if the rise and fall in divorce rates has something to do with dramatic changes in expectations brought about by birth control, followed by a kind of settling-out process as people adjusted? Unlinking sex from procreation changed bargains dating from time immemorial.

Posted by: Texan99 at August 9, 2010 10:05 AM

Perhaps it made marriage less risky. Thus inviting more people to take the risk when they would not have.

Those people usually are the ones who don't hold out. They aren't "fighters". Fighters are crazy people who don't ever give up and like taking large risks for large gains. Those are fighters.

Posted by: Ymarsakar at August 9, 2010 10:10 AM

I wonder if the rise and fall in divorce rates has something to do with dramatic changes in expectations brought about by birth control, followed by a kind of settling-out process as people adjusted?

Could be. I just thought the age and marriage rate factors were interesting.

When the marriage rate goes up, I would expect the divorce rate to increase as well.

When the age of first marriage goes down, I would expect the divorce rate to increase.

And we haven't even begun to control for other demographic factors. My main point is that people who want to say that no fault "caused" an increase in the divorce rate can't even show correlation, much less causation.

That contradicted my original gut feel about no fault divorce, but facts are stubborn things.

Posted by: Cassandra at August 9, 2010 10:19 AM

Ymarsakar, that was a very interesting article. Thanks for linking it!

I can relate a tiny bit to her question of whether or not such a fundamental change as her change of political/ideological philosophy impedes her connection with her husband. I had a recent date where when the topic turned to my job (working for a military support nonprofit), I completely "lost" my civilian date. He "supports the troops" in that vague, semi-condescending way that some people do out of ignorance. I completely failed to communicate to him how my experiences with military support had affected my outlook and philosophy.

It gave me food for thought about how important my military-shaped outlook is to who I am today and how thoroughly a potential partner might or might not need to understand that for me to connect with him. I don't know the answer, but it's obviously important. Hats of to the writer of the article if she can make her marriage work despite the passionately-held political beliefs!

Posted by: FbL at August 9, 2010 10:25 AM

Hmm. I'll have to chew over that data a bit.

My first thought on reading this was, "That insurance is awfully expensive". If you took the premium money for one unit and put it in bank CDs, at the end of 48 months, you would have about $800, vs. the $1250 of coverage. The really interesting bit here is that the yearly increase in coverage after policy maturity is only a little bit more than the yearly premium; if you put the money in the bank instead, compound interest would eventually catch up with and surpass the policy value.

So the most advantageous situation for the policyholder is to get divorced shortly after policy maturity. A bit more food for thought for the moral-hazard consideration. Although, at these prices, I suspect these policies won't attract enough customers to make a difference one way or the other.

Posted by: Cousin Dave at August 9, 2010 11:26 AM

"Statistically speaking, however, the best insurance against divorce for men may well be to marry later in life and choose a woman with a college education."

Since the men you mean often state that they are not inclined to marry at all, they're likely to follow one piece of your advice at least.

That said, I know a woman who married later in life, and who has a college education, and who has recently decided she is unsatisfied with her husband and is divorcing him. The financial wreckage this divorce is producing is, as usual... well, it is as usual.

No fault divorce isn't bad because it may or may not cause a problem. It's bad because it redefines the groundwork of marriage: it becomes less about the family you were supposed to be building, and the foundation for the future, and more about the question of whether the two people currently married feel happy. Marriage was one of the great institutions for striving toward true happiness; it's been damaged by the notion that the thing itself ought to make you happy, and if it doesn't, you should leave it.

Posted by: Grim at August 9, 2010 11:26 AM

That may all be true Grim, but I'm not sure you've gotten the cart/horse order correct.

As you know, I've always thought marriage should be harder to get into and harder to get out of. That said, I'm not convinced that unilateral divorce is the primary driver here - is it the chicken? Or the egg?

I don't know the answer to that question but I suspect that changes in law and social policy tend to follow changes in societal mores. Once marriage became more about individual happiness and fulfillment and less about societal stability, the maintenance/creation of wealth, and building strong families, the desire for easy divorce was pretty predictable.

re: marrying later in life, the average age of first marriage for men *has* gone up. Fewer are marrying, but then fewer are divorcing.

The question is, is that a good thing? What this means generally is that there are more marriages of folks past childbearing age and fewer among the fertile set. But more young people are staying married.

Posted by: Cassandra at August 9, 2010 11:47 AM

I was around when No Fault Divorce came through. It was pitched as a way for women to escape unfulfilling marriages, to liberate themselves from the bondage that held them back from achieving their full potential.

That, coupled with the removal of stigma from shacking up (in the name of sexual liberation, of course) made divorce not only possible, but attractive.

When society changed the definition of the marriage agreement from "for life" to "for now," it's no surprise that fewer people bother to get married and those that do feel free to opt out when they get bored.

Now go read some Judith Wallerstein and learn the rest of the story.

Talk about your moral hazard, indeed.
.

Posted by: joe doakes at August 9, 2010 12:00 PM

The interesting thing, though, is that the proportion of divorces initiated by women hasn't changed very much in the past 100 or so years. It has varied from 60 to 70% but the "two-thirds" proportion has stayed relatively constant.

If no fault is a significant driver (because making it easier to divorce made it easier for women to walk away), shouldn't we have expected to see a lot more women filing for divorce?

Posted by: Cassandra at August 9, 2010 12:10 PM

Trust me - I don't think easy divorce is a good thing.

Nor do I think it's good to walk away from a commitment.

What I'm unsure of (and see no real evidence for) is the notion that no fault changed divorce rates significantly.

Divorce was already on the rise before no fault and the proportion of divorces initiated by women didn't change much after no fault. I remember reading somewhere that in the immediate aftermath of no fault the rate of male filings increased but I can't find the link so I'm not sure. At any rate since the divorce rate is now back where it was before either unilateral OR no fault divorce became widespread, I don't see the evidence that changes in divorce law are driving the bus.

But I'm willing to entertain arguments to the contrary! :)

Posted by: Cassandra at August 9, 2010 12:24 PM

We'd be better off with more people marrying younger, if you're asking me, and more children being produced. However, we also need to make marriage much harder to get into/out of (as you say) so they don't feel, while they are still petulant teenagers/younger-20-somethings, that they can pop smoke when it proves hard.

Maybe we need to get rid of 'irreconcilable differences' as a cause for divorce, too. The judge could learn to say, "You only think they're irreconcilable. You made a promise. Work it out."

Posted by: Grim at August 9, 2010 12:26 PM

I like your last suggestion, Grim. Basically I agree with your entire post.

Posted by: colagirl at August 9, 2010 01:04 PM

However, we also need to make marriage much harder to get into/out of (as you say) so they don't feel, while they are still petulant teenagers/younger-20-somethings, that they can pop smoke when it proves hard.

The imp in me wants to comment that that sounds suspiciously like legislating morality (something that, in other instances, Monsieur Grim has strenuously opposed). NTTIAWWT :p

/running like helk for the barricades before Grim shoots me

Posted by: Cassandra at August 9, 2010 01:09 PM

"PoMo" -- is that, like, the new PC buzzword for wuss?

Posted by: BillT at August 9, 2010 01:20 PM

Heh :)

Forgive me Monsieur deBill. I think it is Phrench for "person who can't seem to get along with the opposite sex but inexplicably thinks we should all take his sage advice so we can all be as miserable as he is" :p

Posted by: Cassandra at August 9, 2010 01:26 PM

that they can pop smoke when it proves hard.

I thought that didn't work on a nuclear explosion?

Posted by: Ymarsakar at August 9, 2010 01:41 PM

I completely "lost" my civilian date. He "supports the troops" in that vague, semi-condescending way that some people do out of ignorance.

It's like a feel good latte. Go to starbucks, order a feel good latte. Worth it even if you have to pay a premium.

Could be worse, as they say. Could be a poison-hate latte.

Posted by: Ymarsakar at August 9, 2010 01:47 PM

You know, I can vaguely remember having had a discussion in which I was talking about the practical difficulties in legislating morality, but I can't remember the context. I'd go back and look, but someone deletes her archives frequently enough that I'm sure I wouldn't be able to find the discussion. :)

However, I'm also sure my own opinions on the subject are evolving. Somewhat rapidly, in that particular case.

Posted by: Grim at August 9, 2010 02:50 PM

I'd go back and look, but someone deletes her archives frequently enough that I'm sure I wouldn't be able to find the discussion.

Bada boom! Bada bing!!!! :)

Posted by: Cassandra at August 9, 2010 03:09 PM

"But I'm willing to entertain arguments to the contrary!

Will that be with or without the disco ball and trampoline? Flying stuffed marmosets and flung flowery trivets maybe? Or just a good, old-fashioned 'Dance of the Seven Layers' by Princess Leia in a cream cheese danish bikini? Do I have to tip the waitress? Is the special still veal?

Posted by: Snarkammando at August 9, 2010 03:44 PM

Let me run something by y'all... I wasn't quite old enough to understand it all when no-fault divorce got started. But I was under the impression that the original intent, at least the one that everyone was willing to talk about, was to provide a "fast track" for couples where both spouses already agreed that they should divorce, and were willing to work out financial arrangements and custody on their own. Basically, the court would simply apply the seal of approval to what the couple had already decided to do.

However, somewhere along the line, that seems to have morphed into unilateral divorce... one spouse decides they want out, they file for divorce, that's it. The other spouse has no recourse. They cannot withhold approval or demand negotiations. This does not seem to fit into the original intent of no-fault. And I'm not sure when it changed.

Posted by: Cousin Dave at August 9, 2010 05:25 PM

I'll just say I never intended - when I was younger - to still be single at this age. When I was in high school, I imagined I'd meet someone during my college years. While I did date during that time, nothing serious developed. I can't explain why, over the years since then, I seem to be undesirable to the "available" men I have come in contact with. While I know there have to still be good men out there, and that any man should be lucky to have me, I can't help but be cynical about it all, after all these years of being alone.

Now, I see men my age (those of an age I desire to be involved with) - now that I guess they're "ready" to be committed to a relationship - finding much younger women. And, yeah, as pathetic as it may sound, I'm regularly trying to check out the left hand of any man I see/meet that I find attractive. I'm not doing well on that score. They're pretty much all already taken, when I'm able to get a good look.

Posted by: Miss Ladybug at August 9, 2010 11:20 PM

"PoMo" -- is that, like, the new PC buzzword for wuss?
I think it is Phrench for "person who can't seem to get along with the opposite sex but inexplicably thinks we should all take his sage advice so we can all be as miserable as he is"

That's what I *said* -- "wuss"...

Posted by: BillT at August 10, 2010 04:57 PM

These statistics show trends with data points at their most recent a decade old. It's not clear that they are relevant to today's society.

Here's a more recent statistic. According to the IRS, for instance, Americans paid $9.4 billion in alimony to former spouses in 2007.

>97% of those payors are men.

That’s up from $5.6 billion a decade earlier.

Posted by: PJ at August 22, 2010 10:07 PM

Post a comment

To reduce comment spam, comments on older posts are put into moderation 5 days after the last activity. Comments with more than one link also go into moderation. If you don't see your comment after posting it, try refreshing the screen. If you still don't see it, your comment is probably in the moderation queue.




Remember Me?

(you may use HTML tags for style)