Closing the Gap – Part 13

Fact #1  — ‘Model’ Complexity

The three most common forms of insurance purchased by the average American citizen are health, auto and property insurance.

In the health insurance field, there are two basic models: male and female.  They each have 206 ‘parts’ and the two models have been essentially unchanged for many, many centuries.

In the auto insurance field, there are hundreds of different models on the road – Ford Taurus, Volkswagon Passat, Toyota Prius, and so on.  These models have a finite number of parts, and from a manufacturing perspective, a Taurus is a Taurus is a Taurus.  Additionally, the only models with any true relevance in the insurance field from a repair perspective are those manufactured in the last 15 years, as 82 percent of all vehicles on the road are 15 years and younger (source: Experian Information Solutions, Inc.).  Nearly all vehicles older than that will be ‘totaled’ if they are involved in an accident.  But even if they were repaired, the repaired Taurus is a Taurus is a Taurus.

In the property insurance field, there are millions of different models sitting atop land.  In fact, every single model is unique, at least within a few years of its initial construction, due to material modifications made to it by its inhabitants (new roof, remodeled kitchen, finished basement, replaced windows, new addition, applied wallpaper, etc.)  And construction could have taken place anytime from 2011 all the way back to the 1700’s here in the United States, and centuries earlier in Europe.

(To be continued…)

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