Chapter Eight
MAU & Quantifying Unquantifiable Regrets
There were other strategies we depended on, between raids
on actuarial territories. In these, we would concede to the
actuaries their rights, but claim the high ground for our own,
among the senior chiefs, as their representatives. The game
seemed so obvious to us that we could not dream of the actuaries
missing the maneuver but they were so focussed on claiming
their rightful territory that they never realized that they
were missing the area of real danger. Our success depended on
keeping them so deceived.
The Newfoundland episode was one of these. The question
rose because of our continuing losses in that province,
coupled with their regulators' intransigence over rating
increases. The nature of what our response to this situation
should be became a controversial topic among the chiefs, with
chiefs of different tribes taking diametrically opposite points
of view. Some were quite aggressive in their point of view,
insisting that we should withdraw our services entirely from
the province and went so far as to suggest encouraging other
insurers to do the same. Others were more conciliatory in
approach, because such an action was not done except by smaller
companies unable to withstand an extended period of losses.
The branch chiefs were naturally alarmed and concerned for
the welfare of their indians, not just appearances.
The actuary had taken the lead in projecting the
picture of future losses. He emphasized our responsibility to
our London Home Office, insisting that rate adequacy was their
area of competence, reminding everyone that an actuary was
required to sign official approvals, documents stating that it
was their professional opinion that the rating structure was
adequate. He concluded that the only sound alternative for the
senior chiefs to choose was to cease writing business in the
province.
This did not please the tribes that spent their days in
the marketplace. They spoke passionately of intangibles such
as industry leadership, branch morale and agent support. To
their keen eyes, total withdrawal would make us seem to the
rest of Canada like petty, robber barons. To Canadians with
their more comprehensive social insurance system, the objective
of insurance was to spread risk, to make risk bearable, and a
large company should be able to sustain losses in one area of
their business, such as auto, while their other areas were not so
problematic. Partial withdrawal was not much better and
would leave the surviving indians in disarray, fearing for their
own futures and unable to effectively counter the negative
reactions of the independent agency force. The residents of
Newfoundland may have been seen as strange and unconventional
by their more affluent neighbors but that only made them seem
more vulnerable in any confrontation with a large multinational
company, making our remaining business there less viable.
Home Office in London began taking an interest and so
our senior chiefs, whose sympathies lay with the market
tribes, were concerned about justifying whatever direction they
would choose. There were considerable dangers and arguments
whichever way they looked. Clearly, they required firm,
defensible ground for their stance. This was the opening for
our own gambit....
... Regrets were expressed on a common
numeric scale, from -100 for most regrettable in the area
under consideration, to 0 for the least regrettable. Applying
the value the chiefs had agreed on for the significance of the
area, to the regrets for the area, we summarized all the regrets
for each different choice.
In the end the conclusion of this approach was not...