Opinion: insurers are underpricing climate tail risk

Catastrophe models built on yesterday's climate are quietly mispricing tomorrow's claims.

ThemeAnax 6 min read
A suburban house surrounded by floodwaters after heavy rain, showing impact of natural disaster.
Share

Ask ten people to define Industry insights and you will get ten answers, most of them describing a symptom rather than the thing itself.

The advice worth ignoring

The expensive mistakes here are rarely the technical ones. They are decisions made quickly, defended slowly, and built upon for six months before anyone recalculates. The evidence here is thinner than anyone quoting it tends to admit.

man standing in front of people sitting beside table with laptop computers
Photo by Campaign Creators on Unsplash

Documentation is a symptom: you write it where the design is unclear. The stated constraint is usually a proxy for a real one nobody wants to say aloud, and optimising the proxy is wasted effort.

Most of the difficulty lives at the boundaries, not in the middle. The things that are easy to count are rarely the things that matter, and once a number reaches a dashboard it starts shaping behaviour whether or not it deserves to.

Begin with the obvious one

Feedback loops shorter than the planning cycle change everything. Where a design is obvious the prose is short, so the length of an explanation is a reasonable proxy for where to look next.

The compounding effects matter far more than the individual wins. Choosing infrastructure before agreeing what it is for is how organisations end up maintaining a system nobody wanted. In practice the answer showed up in the calendar before it showed up in the dashboard.

What looks like a process problem is frequently an ownership problem. Most disagreements that present as strategic turn out, on inspection, to be two people using one word for two things. The caveat is that all of this assumes the underlying goal is settled, which is frequently the actual problem.

The quiet win

The second-order effects arrive about a quarter after the first-order ones. Teams that pick both end up with neither, and usually discover this at the point where reversing would have mattered.

Measurement is usually where this falls apart. Industry insights rewards clarity here more than almost anywhere else, because the wrong target produces work that looks productive and moves nothing. When we mapped it out, four of the seven steps existed only to compensate for the second one.

The tooling question is downstream of the constraint question. Subtraction is structurally underrated: the meeting that stopped happening leaves no artefact to point at in a review. The version of this that works fits on an index card. The version that fails needs an onboarding session.

Where to start on Monday

The interesting constraint is almost never the one in the brief. Success has many causes and teaches very little; failure tends to have one, and it is usually obvious in hindsight. Try writing the constraint on one line before opening a vendor comparison; the line is usually harder than the comparison.

A shared definition of "done" removes more friction than any tool. A team that changes approach every quarter pays a coordination tax that routinely exceeds whatever the change was meant to fix.

It helps to separate the decision from the execution. It is comfortable, it is legible to management, and it is close to worthless once you measure what it actually changes. We ran both approaches in parallel for six weeks. The difference was smaller than the cost of the debate about it.

What to do first

Consistency is worth more than any individual improvement to Industry insights. Handoffs between people who each hold a coherent local picture and no shared one produce most of the pain later attributed to tooling. It is worth saying that we have not run this long enough to be confident.

The default answer is right often enough to be dangerous. The first quarter shows the intended effect; the second shows what the intended effect displaced. Reasonable people land elsewhere on this, usually because their constraints differ more than the vocabulary suggests.

The first thing to establish is what you are actually optimising for. If you learn on Friday what you assumed on Monday, the assumption never has time to become an architecture. Set a date at which you will stop, and write down in advance what would make you stop earlier.

The one people skip

Scope is the variable everyone adjusts last and should adjust first. Being right sixty per cent of the time builds exactly the kind of confidence that makes the other forty per cent expensive. A useful test: if this disappeared tomorrow, how long before anyone noticed?

Consider the failure mode rather than the success case. When responsibility is spread across a group, the work that falls between the named parts is the work that does not happen. The clearest signal was that people stopped asking where things were.

What we look for now:

  1. Review the numbers monthly; change the targets rarely
  2. Keep the feedback loop shorter than the planning cycle
  3. Decide in advance what would make you stop

The habit that compounds

Speed and reversibility are the trade-off worth naming out loud. The decision is usually cheap and reversible; the execution is where the cost lives, and that is where the argument should have happened. The counter-argument deserves a hearing, and it is stronger than its usual proponents make it sound.

There is a version of Industry insights that is mostly ritual. Cutting scope early is cheap and slightly embarrassing; cutting it late is expensive and deeply embarrassing. This is easier to write than to hold to when a deadline appears.

The one that only matters at scale

Nobody gets credit for the work that did not need doing. A small improvement applied consistently beats a dramatic one applied once, which is unsatisfying advice precisely because it is correct. One team we spoke to cut their review stage entirely and found throughput unchanged, which told them something the metrics had not.

Feedback loops shorter than the planning cycle change everything. If you learn on Friday what you assumed on Monday, the assumption never has time to become an architecture.

The tooling question is downstream of the constraint question. The things that are easy to count are rarely the things that matter, and once a number reaches a dashboard it starts shaping behaviour whether or not it deserves to.

The expensive mistake

The interesting constraint is almost never the one in the brief. Cutting scope early is cheap and slightly embarrassing; cutting it late is expensive and deeply embarrassing.

The first thing to establish is what you are actually optimising for. A small improvement applied consistently beats a dramatic one applied once, which is unsatisfying advice precisely because it is correct.

The cost of a bad decision is rarely the decision. It is the six months of building on top of it.

— Overheard in a retrospective

The advice worth ignoring

The second-order effects arrive about a quarter after the first-order ones. Choosing infrastructure before agreeing what it is for is how organisations end up maintaining a system nobody wanted. That said, none of this generalises cleanly across team sizes.

Consistency is worth more than any individual improvement to Industry insights. Industry insights rewards clarity here more than almost anywhere else, because the wrong target produces work that looks productive and moves nothing. There are organisations where the opposite is true, and they are not obviously worse off.

Begin with the obvious one

Consider the failure mode rather than the success case. The stated constraint is usually a proxy for a real one nobody wants to say aloud, and optimising the proxy is wasted effort. The evidence here is thinner than anyone quoting it tends to admit.

There is a version of Industry insights that is mostly ritual. Most disagreements that present as strategic turn out, on inspection, to be two people using one word for two things. The caveat is that all of this assumes the underlying goal is settled, which is frequently the actual problem.

The quiet win

A shared definition of "done" removes more friction than any tool. When responsibility is spread across a group, the work that falls between the named parts is the work that does not happen. Ask what would have to be true for the opposite approach to be correct, and see whether anyone can answer.

What looks like a process problem is frequently an ownership problem. The first quarter shows the intended effect; the second shows what the intended effect displaced. This is easier to write than to hold to when a deadline appears.

Where to start on Monday

The compounding effects matter far more than the individual wins. Handoffs between people who each hold a coherent local picture and no shared one produce most of the pain later attributed to tooling. It is worth saying that we have not run this long enough to be confident.

We will revisit this once we have another two quarters of data. The current answer feels right, which is exactly when it is worth checking.

baseline

Thoughts, stories and ideas.

Check your inbox for the link.

Free. Unsubscribe from the foot of any issue.