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ACTIVE UNDERWRITING:

HELPING PEOPLE BY UNDERSTANDING WHAT WORKS

THE IDEA THAT DIDN'T SPREAD

Every once in a while, the world rediscovers a wonderful idea that deserves wider application. One of the reasons the practice doesn't spread, is that it hasn't got a name to suit the breadth of its possible applications. We'll call it "active underwriting." Active underwriting is the following process:

TEST: Take some thing or process you already have and test its performance under realistic circumstances.

UNDERSTAND: If it does not work, use the test measurements or additional tests to find out why.

IMPROVE: Make the thing or process better using insights from the test results.

A good example of active underwriting (and the inpiration for its name) is the interaction between industry and the Underwriters Laboratory. The Underwriters Laboaratory was founded in Chicago in 1893 to find out why the Hall of Electricity had burned down, in order to prevent further fires. The laboratory investigated the fire and tested the manufacturer's products under realistic and extreme conditions. The manufactureres used the results of the laboratory's tests to redesign equipment to work better and more safely.

"Underwriting" generally refers to any kind of insurance or guarantee. Usually, insurers passively estimate the odds and costs of failure and make a statistical bet with their customers, collecting enough money to have some left after all the failures have been paid for. But the process started by Underwriters Laboratory was more active: don't just pay for failures (a form of gambling), actively find out why the failures are happening and redesign the system to eliminate failures. Passive insurance is a form of gambling; active underwriting is applied science.

You would think that such a wonderful ideas would spread to other areas. To some degree, it did. Underwriters Laboratory diversfied into testing fireproof favbices and other items outside the realm of electric appliances. But insurance as a whole never caught on to the benefits of scientific analysis and prevention. Health insurers, for example, simply assess the odds of your becoming ill and charge premiums accordingly. They don't figure out why some hospitals or doctors are better than others at curing disease, and they don't actively seek ways to prevent their policy holders from becoming ill.

THE NEED FOR ACTIVE UNDERWRITING

All our institutions -- schools, business, governments, and insurance companies -- should revisit the idea of active underwriting of their products and services. They should measure and test how things work and seek ways to guarantee better performance in the future. Schools should keep track of which methods produce the most productive citizens (higher accomplishments, higher salaries) decades later. Businesses should find out how customers like their products and redesign the products accordingly. Governments should establish measures of perrformance, offer multiple kinds of services on an experimental basis, and find out which policies work best. Insurance companies shold explore the reasons behind the failures they insure and seek ways to reduce the risks for all involved. In short, we need to abandon our passive gambler's stance and seek improvement through active underwriting.

(Copyright by Trust in Diversity and Exchange)


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