How Variability In Professional Judgment Affects Claims

Underwriting, claims, and the criminal justice system: What do these three environments have in common? The answer is noise.

If you work in underwriting or claims management, you may want to read ‘Noise: A Flaw in Human Judgment’ by Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein.

In this book, the authors use examples from the insurance industry to shed light on the topic of how variability in human judgments may be costing the industry millions of dollars.

While Kahneman spends significantly more time on the topic of criminal sentencing than insurance in the book, this article’s focus is on the potential impact of noise in our industry.

What is ‘noise’? Simply stated, it is the unwanted variability in professional judgments that lead to significantly different outcomes in similar fact patterns due to the individual professional making the judgment.