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Like many actuaries, I’ve spent a large part of my career designing, building and using the results of complicated models. Current developments in the regulatory and rating-agency realms, as well as advances in technology, ensure that models will continue to play an important role in the P&C insurance industry. This could and should be very positive for the industry—but if we are not careful, it could also perpetuate counterproductive behaviors. It is entirely possible that, as the use of models increases, so too will uncritical acceptance of the results they produce. This would be unfortunate, as models are most useful when users understand their proper role and limitations; maintain an appropriate level of skepticism; and view their results as only one of many inputs to the final decision.

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