The fairness of merit is at the heart of the digital revolution happening in insurance at the moment. While not about insurance, this book delivers some important insights into key questions about the future of insurance and its relations with society.
Merit and the fairness that it represents is a subject of discussion not only in insurance circles, but in US political circles as well. Michael Sandel’s book ‘The Tyranny of Merit’ offers up some interesting arguments about merit, and in particular, what can happen when it dominates decisions.
I would recommend anyone working in insurance with an interest in fairness, discrimination, vulnerability or access, to read Sandel’s book. It’s not about insurance, but it is about something very relevant to today’s market.
There’s a debate in American political circles at the moment about the widespread use of merit in US university admission decisions. That debate has become heated, due to a number of scandals involving money, power and elite universities. Sandel, a professor and political philosopher at Harvard University, offers up this critique of merit.
He is not against the use of merit in decisions. It’s just that he sees dangers in it being overused.
“The meritocratic ideal places great weight on the notion of personal responsibility Holding people responsible for what they do is a good thing, up to a point. It respects their capacity to think and act for themselves, as moral agents and as citizens. But it is one thing to hold people responsible for acting morally; it is something else to assume that we are, each of us, wholly responsible for our lot in life.”
Merit is good, up to a point
He goes on to explore that merit as "a good thing, up to a point” in detail. When does the use of merit stop being “a good thing”? What are the consequences of going beyond that “point”? Who is most affected when merit is overused or wrongly applied? These are the sort of questions he addresses.
These sort of questions matter to insurance people because of the key change taking place in the market, with actuarial fairness slowly giving way to behavioural fairness (more here). Much of the discussion in the market around behavioural fairness is premised upon the fairness of merit. Yet it’s a discussion that I believe is far too narrow. That’s because it distances itself from other fairness discussions, relating to vulnerability and access to insurance. What Sandel’s book does well is show just how much fairness of merit is intertwined with fairness of need (aka vulnerability) and fairness of access.
Where Sandel is perhaps at his most challenging is in relation to equality.
“It is important to notice that the meritocratic ideal is about mobility, not equality. It does not say that there is anything wrong with yawning gaps between rich and poor; it only insists that the children of the rich and the children of the poor should be able, over time, to swap places based on their merits – to rise or fall as a result of their effort and talent. No one should be stuck at the bottom, or ensconced at the top, due to prejudice or privilege.
What matters for a meritocracy is that everyone has an equal chance to climb the ladder of success; it has noting to say about how far apart the rungs of the ladder should be. The meritocratic ideal is not a remedy for inequality; it is a justification of inequality.”
Behavioural Fairness and Discrimination
The key message for insurance people here is that the justification for behavioural fairness as the only fair way now of designing insurance rests on controversial grounds. It does not stand above, or remote from, the need for equality in how insurance is designed, priced and delivered. That’s because merit does not provide a complete answer to questions like ‘what is fair?’ or ‘where is the equality in this?’
To put it more pithily, designing a product based on behavioural fairness does not obviate you from obligations to be non-discriminatory.
The Common Good
Sandel ends his book with a conclusion centred around the notion of ‘the common good’. He says that we need not just the opportunities that merit offers, but also a strong sense of common interests. We need a fairness that provides cohesion and solidarity, as well as the opportunities of merit. For insurance people, this is pretty close to what I can ‘the equality of fairness”, a topic I’m devoting a lot of thought to at the moment. I believe it will define the shape of insurance to come.
Details of the Book
The Tyranny of Merit
Author - Michael Sandel
Publisher - Penguin in the UK.
First Published - 2020 in the UK