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How is it a conflict of interest? Their business is to price their rates correctly, so they need to measure the actual failure characteristics. Pricing insuran

How is it a conflict of interest? Their business is to price their rates correctly, so they need to measure the actual failure characteristics. Pricing insurance is a balancing act. If you overestimate then your rates will not be competitive. If you underestimate then you pay out more in claims then you collect in premiums.

calvano915 5y ago
This information may encourage more purchases of their insurance product. It's a conflict that is worth stating when considering the information they're providing.
ZeroGravitas 5y ago
Do insurance companies advertise? If they do, then spreading viral stories about the need for their kind of insurance is probably a valid strategy too.
webmobdev 5y ago
How is it a conflict of interest? They could be exaggerating their findings - fear and anxiety are excellent motivators used by advertisers since the dawn of capitalism.
Frost1x 5y ago
The conflict of interest is that they have financial incentives for you to believe failure rates are worse than they are. Insurance may need accurate assessments for a sustainable business model, but their business model also relies on people assessing risk as higher than their assessment or at least that an accurate risk assessment + overhead fees to assess it is less than my own. As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' As an insurance company, I want people the opposite, that reality of risk lies lower than what you think it is, so I can make money. I want a bunch of worried low risk people to pay overhead and marginal fees so my margins are frothier.
- gotoeleven 5y ago
  Since they're an insurance company, doing this kind of assessment is their core business.. they have every incentive to not over or under estimate it. So you're positing that they have some real numbers on failure rates that they keep secret and some exaggerated numbers they tout publicly? That would require dishonesty at a level that would ruin the company if it was found out, so it seems unlikely they would risk it.
  - Leherenn 5y ago
    The funny thing with insurance is that if they ever become too good at estimating risks, they will destroy themselves. You don't need insurance if you can perfectly predict the future. Though I don't think we particularly close to this point, so I doubt they care too much.
    - quickthrowman 5y ago
      It does seem clairvoyance would negate the need for insurance, but that prompts another question: why do you think a clairvoyant person or machine is possible in any way? Also, if an insurance company had perfect knowledge of future claims by being clairvoyant, they could charge a suitable risk premium to write policies where they wouldn’t lose any money, since they would also know how many policies they would be writing.
- setr 5y ago
  > As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' I don’t think that’s entirely right — the main value add of insurance is to the rare, mind numbingly expensive events — ER visits, crashing into a RR, house burning down, etc. You’re paying to minimize tail risk, including risk you couldn’t possibly self-insure against in reasonable time (my payments to insurance is not going to reach the value of my home — the bet is whether my home will ever burn down). Regardless, it’s still a conflict of interest in this case
  - 5y ago
jnmandal 5y ago
I'm going to assume you are asking in good faith. From wikipedia: "A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another" In this specific case where the firm is publishing research they have funded, there are essentially two interests or activities at play: A. research to determine the extent of solar panel installation performance or lack thereof B. selling financial products based on performance Since interest B would be negatively impacted by a certain outcome from interest A (a finding that solar installation performance is optimal, in this case), that implies the firm's performance of activity A may have been affected in order to reduce negative impact to the firm overall. We see this a lot in industry-funded research. Its not unusual. For example, recently a lot of airlines have funded studies about Covid19 spread in airplane cabins. To be published in a reputable journal, researchers are compelled to declare these interests in the cover page of their papers. Also, a good journalist will state this somewhere in their piece (normally at the top or the bottom, conventionally in italics). To your point about competition and rates, that is really not any part of conventions on declaring interest conflicts in academic research but I'll entertain an argument about it here because I don't think the market forces are as strong as you imply. The idea that a product will be priced perfectly simply does not apply in a niche market such as this. When you are selling a niche product, the market will not be deep enough to force firms into the behaviour you are describing. This already applies to things as widely held as flood insurance where the market is so shallow, that the federal government has to intervene to make it viable. Solar PV Installation performance insurance (not to mention options) is extremely niche.
- tantalor 5y ago
  Great points, thank you for going into detail. I think "conflict of interest" is frequently misused. I was taught it describes situations where one's professional/ethical/legal obligations are opposed, such as an attorney representing competing clients, or a board member approving a contract with a company he is an investor in. I realize this is a semantic point. In this case, I don't think kWh Analytics has any professional obligation to a standard of science or journalism, so there's no conflict.

calvano915 5y ago

This information may encourage more purchases of their insurance product. It's a conflict that is worth stating when considering the information they're providing.

ZeroGravitas 5y ago

Do insurance companies advertise? If they do, then spreading viral stories about the need for their kind of insurance is probably a valid strategy too.

webmobdev 5y ago

How is it a conflict of interest? They could be exaggerating their findings - fear and anxiety are excellent motivators used by advertisers since the dawn of capitalism.

Frost1x 5y ago

The conflict of interest is that they have financial incentives for you to believe failure rates are worse than they are. Insurance may need accurate assessments for a sustainable business model, but their business model also relies on people assessing risk as higher than their assessment or at least that an accurate risk assessment + overhead fees to assess it is less than my own. As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' As an insurance company, I want people the opposite, that reality of risk lies lower than what you think it is, so I can make money. I want a bunch of worried low risk people to pay overhead and marginal fees so my margins are frothier.

gotoeleven 5y ago
Since they're an insurance company, doing this kind of assessment is their core business.. they have every incentive to not over or under estimate it. So you're positing that they have some real numbers on failure rates that they keep secret and some exaggerated numbers they tout publicly? That would require dishonesty at a level that would ruin the company if it was found out, so it seems unlikely they would risk it.
- Leherenn 5y ago
  The funny thing with insurance is that if they ever become too good at estimating risks, they will destroy themselves. You don't need insurance if you can perfectly predict the future. Though I don't think we particularly close to this point, so I doubt they care too much.
  - quickthrowman 5y ago
    It does seem clairvoyance would negate the need for insurance, but that prompts another question: why do you think a clairvoyant person or machine is possible in any way? Also, if an insurance company had perfect knowledge of future claims by being clairvoyant, they could charge a suitable risk premium to write policies where they wouldn’t lose any money, since they would also know how many policies they would be writing.
setr 5y ago
> As a consumer, I only want insurance if I think they've assessed the value to be lower than what I'd pay out of pocket to 'self insure.' I don’t think that’s entirely right — the main value add of insurance is to the rare, mind numbingly expensive events — ER visits, crashing into a RR, house burning down, etc. You’re paying to minimize tail risk, including risk you couldn’t possibly self-insure against in reasonable time (my payments to insurance is not going to reach the value of my home — the bet is whether my home will ever burn down). Regardless, it’s still a conflict of interest in this case
- 5y ago

jnmandal 5y ago

I'm going to assume you are asking in good faith. From wikipedia: "A conflict of interest (COI) is a situation in which a person or organization is involved in multiple interests, financial or otherwise, and serving one interest could involve working against another" In this specific case where the firm is publishing research they have funded, there are essentially two interests or activities at play: A. research to determine the extent of solar panel installation performance or lack thereof B. selling financial products based on performance Since interest B would be negatively impacted by a certain outcome from interest A (a finding that solar installation performance is optimal, in this case), that implies the firm's performance of activity A may have been affected in order to reduce negative impact to the firm overall. We see this a lot in industry-funded research. Its not unusual. For example, recently a lot of airlines have funded studies about Covid19 spread in airplane cabins. To be published in a reputable journal, researchers are compelled to declare these interests in the cover page of their papers. Also, a good journalist will state this somewhere in their piece (normally at the top or the bottom, conventionally in italics). To your point about competition and rates, that is really not any part of conventions on declaring interest conflicts in academic research but I'll entertain an argument about it here because I don't think the market forces are as strong as you imply. The idea that a product will be priced perfectly simply does not apply in a niche market such as this. When you are selling a niche product, the market will not be deep enough to force firms into the behaviour you are describing. This already applies to things as widely held as flood insurance where the market is so shallow, that the federal government has to intervene to make it viable. Solar PV Installation performance insurance (not to mention options) is extremely niche.

tantalor 5y ago
Great points, thank you for going into detail. I think "conflict of interest" is frequently misused. I was taught it describes situations where one's professional/ethical/legal obligations are opposed, such as an attorney representing competing clients, or a board member approving a contract with a company he is an investor in. I realize this is a semantic point. In this case, I don't think kWh Analytics has any professional obligation to a standard of science or journalism, so there's no conflict.