The thought that keeps rattling around in my head as I think about underwriting these days is: How can you make accurate predictions about risk based on historical experience... when the world has decided to throw so much of that experience out the window?

COVID-19 changed all sorts of assumptions about life expectancy, at least in the short run and perhaps in the long run; we just don't know yet. The pandemic also reset our patterns of work, changing the risks associated with buildings and with those who work in offices and factories -- or maybe not, as more companies insist on a return to the office.  

Inflation came out of nowhere for the first time in decades and made just about every sort of claim more expensive, especially in auto, where supply chain issues sent car prices through the roof. Now, inflation is subsiding... we think... but how fast? 

And don't get me started on the Russian invasion of Ukraine, a stunner that not only created tons of business risks but that greatly stepped up the general geopolitical uncertainty, including on the possibility that China will invade Taiwan.

I wish I had an answer for underwriters. Instead, as usual, I have a story. It's one that was told to me in 2000 by Gary Loveman, a Harvard Business School professor who rather unexpectedly found himself being asked to be COO at Harrah's and who reinvented loyalty programs, initially for Harrah's and eventually for the whole gambling industry. 

The analogy is far from perfect. Regulations will prevent insurers from implementing many of the ideas. That's why I used the word "dream" in the headline, rather than offering a concrete proposal. But there may be aspects of his ideas that can help with underwriting -- and it's a good story....

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