Managing Overconfidence

Topics:
Insurance
Tags:
Marketing,
Marketing Research,
Pricing,
Pricing Strategy,
Towers Perrin
Source:
Towers Perrin

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Overview: For years, behavioral scientists have talked about the need for businesses to manage overconfidence. Nowhere is the issue of overconfidence more important than in the property/casualty insurance industry, particularly in pricing and underwriting. Actuaries and underwriters make critical assumptions, based on imperfect knowledge, about the future costs of business being written. To make sound decisions, they must have a realistic view of what they know and what they don't know. Overconfidence in making pricing assumptions, given the potential for adverse outcomes, can have a devastating impact on underwriting results.

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Format: PDF | Size: 79KB | Date: Mar 2003 | Pages: 4

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