Can't Win for Losing: Another Tale from the P&C Side

Our primary focus hear at IB is on life and health insurance (mostly health), but from time to time, we find interesting/infuriating stories from or about our P&C colleagues. For example:

"Scientists say the jury is still out on whether rising sea temperatures will cause more hurricanes to hit U.S. coastlines. Yet some insurance companies are boosting premiums based on assumptions that they will. Others are withdrawing from coastal communities altogether."

While calamities such as Hurricane Katrina make the news even years later, it's the day to day, season to season losses that really rack up the big dollars, and losses. On our side of the biz, new underwriting tools like genetic testing cause major controversy; likewise, a new program called "Computerized Catastrophe Modeling" promises to cause a comparable uproar on the P&C side.

CCM uses advanced computer modeling to predict real-world events, and then to extrapolate losses. Of course, it's not the only tool that actuaries and underwriters use to assess the scope of the risk, but it has apparently become a very useful and productive one.

Critics, on the other hand, charge that CCM predictions have led to ever-increasing insurance rates, forcing some folks to move to more user-friendly climes. They also have a problem with one of the underlying premises of CCM programs: that water temperatures are rising and thus triggering more frequent and powerful storms.

It's interesting reading for those of us in flyover country: we hardly ever get any hurricanes here. But it's literally life and death on the coasts, and could have far-reaching economic impact, as well.

Thought-provoking.