Catastrophe Modeling Pioneer Clark Advises on Insurers’ Best Practices

November 6, 2007

  • November 6, 2007 at 12:43 pm
    Long-Time Skeptic says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Yes, Ms. Clark was a pioneer of sorts. That said, however, until and unless the workings of the “black boxes” that she pioneered are opened to the light of day, there will be continued mistrust of the insurance industry and the rate requests that are filed with regulators.

    The defense of “propriety information” casts a long, dark shadow.

  • November 6, 2007 at 1:48 am
    Tinkerbell says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    What????? For my own edification, please explain your comments further.

  • November 6, 2007 at 2:02 am
    Long-Time Skeptic says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    1. Typo–should have read: “proprietary”.

    2. Historically, the modelers refused to disclose the algorithms that were used for making their loss projections, using “proprietary information” as their shield.

    3. This created mistrust of their techniques and results, particularly due to the very high loss projections that emerged, resulting in claimed needs for substantial rate increases. The term “black box”, such as used by a magician, emerged to characterize the inventions of Ms. Clark and other “pioneers”.

    4. It is not clear that much has changed, at least from the standpoint of the regulatory community or insurance consumers.

  • November 6, 2007 at 5:22 am
    Actuary says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    This is not true at all. Client companies are privy to the modelers’ underlying assumptions, as are regulators, providing they do not make their findings public. The Florida Commission on Hurricane Loss Projection Methodology reviews each of the models annually under these terms. The Florida Office of Insurance Regulation refuses. That’s their choice, but it’s hard to complain about a black box when you refuse to look inside.

    The companies aren’t trying to hide anything from anyone except each other. In a competitive market, why would you want to give away all your secrets to your competitors?



Add a Comment

Your email address will not be published. Required fields are marked *

*