X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Reminiscent of the scene in Alfred Hitchcock’s “The Birds,” when the sky turns black with attacking avians, I often feel as if I’m being attacked by throngs of bad statistics when I read today’s insurance and business press. “The Birds” was just a movie, but bad statistics can draw real blood. Bad statistics can lead to bad strategies and bad decisions. For proof, look no further than our economic malaise. While some people rely on statistics, others avoid statistics at all costs. Some people believe Benjamin Disraeli’s famous saying, “There are three kinds of lies: lies, damned lies and statistics.” I would qualify to say that bad statistics are damned lies, while good statistics are key to intelligent management and a huge competitive advantage. This makes it essential to discern between the two. Sometimes advanced education is required to identify the good from the bad, but usually common sense will suffice. Here are some examples: Check the data source I recently examined a PowerPoint from an agency consultant. I was jealous of his beautiful graphs that were so artistically crafted. After looking more closely, though, I realized they were just art. There was no real data behind them. The consultant had started with how he wanted the charts to look, then created the data that would generate his desired charts. He had not gathered any real data. The lesson: Always check the data source. The best data is random. If it’s not random, suspect it. Be particularly cautious if the organization that created the study also is selling something because its study is more likely to be biased.

Beware of averages Studies presenting only averages are of little use because the information regarding what creates better or worse performance is absent, as is variance. Averages are not usually adjusted to the median, so a few scores could greatly skew the result. And even if you see averages showing the numbers for the top performers or worst performers, that data often is meaningless because the numbers are just averages. Many factors affect averages–without more information, how do you know what to do about it?

Dig Deeper

PropertyCasualty360

Join PropertyCasualty360

Don’t miss crucial news and insights you need to make informed decisions for your P&C insurance business. Join PropertyCasualty360.com now!

  • Unlimited access to PropertyCasualty360.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including BenefitsPRO.com, ThinkAdvisor.com and Law.com
  • Exclusive discounts on PropertyCasualty360, National Underwriter, Claims and ALM events

Already have an account? Sign In Now
Join PropertyCasualty360

Copyright © 2019 ALM Media Properties, LLC. All Rights Reserved.