Thank you very much for your insightful post. Outside of the data privacy issues, I also wonder if the insurance model might be eroded if risk is priced too perfectly? For example, if premiums decline for the least risky customers, is it not likely that premiums will increase for more risky customers or customers that do not want to share their personal data in order for the insurance companies to retain revenue levels? At some point, do riskier drivers then decide it is not worth purchasing insurance because the premiums don’t make sense vs. potential damage to their cars (or, alternatively, do they move to competitors)? This is a very interesting topic – thank you very much for writing about it.
Thank you very much for your interesting and timely post. On a somewhat related note, I was just talking to some Goldman employees this weekend who mentioned that Marcus has received significantly more deposits than they initially anticipated, which is putting pressure on some of Goldman’s ratios given that these deposits need to be accounted for as short-term liabilities. Goldman is truly an industry leader in the investment banking sector and incredibly nimble and innovative for such a large institution. It will be very interesting to see how their competitors – and especially the European investment banks – tackle this same issue. Do you think that Goldman’s initiatives here will further differentiate them in the marketplace? As a previous employee of Deutsche Bank, I cannot imagine some of these European institutions being able to keep pace (we were about three years behind Goldman in just VPN capabilities).
Thank you very much for such a great post. I had no idea the Estonian government had developed this initiative. As you nicely outlined, leveraging the internet seems like a great way to increase accountability and cut-out any middle-men who may be unfairly profiting. You mentioned in the post potential concerns with data theft and less control over information flow. Do you think there are any potential concerns with data aggregation of citizens online? I am struggling to think of specific examples where online voting might aggregate more information on citizens than the system in the U.S., but are there any potential privacy concerns that Estonian citizens have? As other commenters have mentioned, it seems like other countries could definitely learn from Estonia’s model.
Thank you very much for your very interesting article! The comment that really resonated with me was your reference to myHBS and Canvas. I believe that if a learning institution really wants to emphasize the importance of a particular subject (in this case, technology) they should lead by example. The fact that there isn’t one integrated online (and mobile-enabled) system where students can see their course calendar, event schedule, to do list, and class details is very surprising to me. Many times, I find myself thinking fondly of more simple times when I was pursuing my undergraduate degree from 2005-2009 and most of our coursework and syllabuses were done via hard copies. On the flip side, given my negative experience with myHBS, Thrive, course calendars, and Canvas, I have noted the importance of technology in business. Technology for technology sake is not helpful. It must be designed in order to create efficiencies for the end user.
– Jess Delfino
Thank you for the well thought-out post: I also find this industry very interesting as P&C insurance companies are truly on the “front line” of shouldering the costs of climate change. I wrote a similar piece about AIG, and it was interesting to compare their initiatives to AXA’s (many of them are the same). The reinsurance option is interesting, and Andres and Ilan asked me for my opinion on CAT bonds specifically. I definitely think that bundling different levels of risk exposure together to achieve diversification in the reinsurance market is an innovative way for companies such as AXA and AIG to free-up capital and provide higher-risk customers (a good example was Amtrak who operates the train system in the Northeast United States) the ability to get coverage.
My question for AXA specifically is if they are rewarding new policyholders who implement “greener” alternatives in their business or property with lower premiums? AIG and some other U.S. insurance companies are providing products known as ‘Green Replacement’ policies that seem like an interesting preventative solution.
Thanks once again for a very informative post,
Thank you for writing such an interesting post. I commented on a similar post about ExxonMobil (https://d3.harvard.edu/platform-rctom/submission/exxonmobil-fueling-climate-change/) posing the question of whether Shell (or Exxon, BP, or Chevron) should really shift its focus towards renewable energy solutions? I completely agree that oil and gas producers should look to minimize their GHG emissions from a corporate perspective, but should they fundamentally change the nature of their business (I would include natural gas production as part of their core business)? Society will always require some level of oil and gas (even if the transportation and power industries move towards green energy solutions, as I’m sure you’re even more aware than I am, many important chemicals and materials require oil-based raw materials or by-products from the refining process) so should companies like Shell not continue to focus on E&P and resource assessment in the most environmentally-friendly manner and allow more nimble clean energy businesses to invest in alternative energy solutions? I guess from your experience working at an oil and gas company, how successful do you really think they would be in the market if they shifted focus towards clean energy solutions (excluding natural gas)? To add to the complexity, I assume state-owned companies such as Saudi Aramco and Gazprom would likely continue their acquisition of strategic reserves to the extent companies in the private sector scale back.
Thanks very much!
Really great post. To Alan’s earlier comment, I think this is a prime example of how well-intentioned regulations usually result in unintended economic consequences. My key question for you is if you think that governmental bodies can in fact put forth coherent energy policies that do not benefit certain economic groups at the expense of others? Do you think that this is doable in the solar energy space specifically? It seems like a key issue here is the utility company purchasing the NEM at the residential rate. I was recently reading that cities such as Austin were trying to come up with another model (value-of-solar tariff) but that ran into some income tax issues. Additionally, solar energy puts additional pressure on the grid, so I’m a little unclear as to way those households participating in NEM receive this residential rate that includes the cost of covering the grid when they are still putting pressure on the grid itself?
Thank you for your provocative and interesting post. I always find it interesting when people refer to fossil fuels as a “drug” as this drug has catapulted millions of people out of poverty and advanced civilization in countless ways. Although I do agree that Exxon should look to minimize their greenhouse gas footprint, I would like to challenge the argument that they are the company who should be tasked with developing clean energy solutions. They are a business whose competitive advantage is exploration, resource assessment, efficient production, pipeline management, and refining operations. Investing in new energy alternatives and bringing these innovative products to market is not their area of expertise, and I would bet that with their size and corporate culture, they would fail. I would much rather a more nimble, innovative business with a strong focus on R&D take the reins to take market share from fossil fuels. In the interim, I do not think it is a bad thing to have an American company who owns strategic oil and gas reserves, especially as Exxon is smaller in terms of both revenue and bpd than Saudi Aramco, Gazprom, and NIOC. On the lobbying point, to the extent that their money is accepted by policymakers, I would place the blame with our elected officials as opposed to the company. We elect our representatives because they purport to care about issues facing society, and many large businesses lobby the government for many different causes.
Thanks for writing a post that poses the good question about what oil and gas companies’ roles should be in clean energy development.
Thank you so much for your comment – I definitely agree that CAT bonds are an innovative solution. I replied to Andres comment above with one potential issue that will be interesting to track in this market as interest rates start to rise. A lot of it is summarized (with a lot more expertise and knowledge than I have) in an interesting article in the WSJ this summer: http://www.wsj.com/articles/the-insurance-industry-has-been-turned-upside-down-by-catastrophe-bonds-1470598470
Thank you so much for your thoughtful comment – you brought up some very interesting points. I think CAT bonds are definitely an innovative solution and allow underwriters to free-up capital on their balance sheets while allowing individuals in high-risk areas to obtain private insurance coverage, as you pointed out. Interestingly, quantitative easing has actually created some potential risk and reward issues in the CAT bond market as investors who are looking for yield have driven up prices of these bonds. In 2014, Berkshire Hathaway quietly stated that they “constrained the volume of business” in this reinsurance market because of “management’s assessment of the adequacy of premium rates”. Given the outlook that natural disasters are going to become more unpredictable, it appears that some major investors, such as Buffet, are concerned that the CAT market has worked thus far because the instruments haven’t faced any large losses. That being said, I personally cannot think of a better solution, but it will be interesting to see what may happen to capital markets if multiple hurricanes hit just as interest rates start to increase.
Thank you for your thoughtful post. What I struggle to reconcile is the conflict between the recommendations (specifically, not traveling to Iceland and limiting flights to Iceland) and the ultimate business concern of climate change deterring tourists from visiting the country. While I agree with the ethical argument that we should be concerned with preserving the glaciers, limiting the number of flights and requiring investment in Icelandair planes will cause an increase in flight prices and a decrease in the number of tourists. As 12% of the country’s total workforce is employed in tourism-related industries and 5% of the country’s GDP is directly linked to tourism, a preemptive decrease in tourism will have a notable impact on Iceland’s economy. To the extent the performance of local businesses and the government’s tax revenues suffers, I assume there would be less capital available to invest in clean energy solutions. I believe some other comments have also noted that if Iceland becomes more expensive to travel to, will these tourists instead fly to a place like Mexico and emit the same amount of carbon dioxide? This exemplifies why this issue is so complex, but wouldn’t these recommendations result in Iceland (and specifically Icelandair) falling on their own sword to no effect?