Behavioural economics and underwriting – how science can back expert judgement
The lifeblood of underwriting is the understanding and prediction of adverse events. Traditionally, an underwriter’s work comprises expert data analysis, an alignment with portfolio strategy, and expert judgement.
Emerging research findings show that behavioural economics, in turn, can do a lot to augment the robustness of expert judgement and thereby improve underwriting performance.
We interviewed Maura Feddersen, a behavioural economist at Swiss Re, to understand how underwriters are enhancing the accuracy of their predictions by counteracting the effect of cognitive biases.
We also discussed where human expert judgement will remain superior to algorithms and where behavioural science is relevant in automated decision making.