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Grand Galactic Actuary – Short Story by G. Stolyarov II

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Categories: Fiction, Transhumanism, Tags: , , , , , , , , ,

The New Renaissance HatG. Stolyarov II
******************************

The short story below was authored by Gennady Stolyarov II, ASA, ACAS, MAAA, CPCU, ARe, ARC, API, AIS, AIE, AIAF, Chairman of the U.S. Transhumanist Party and Editor-in-Chief of The Rational Argumentator, and is one of the entries in the Society of Actuaries 12th Speculative Fiction Contest. It was published as one of the contest entries here.

You can read all of the entries here and vote for your choice of three of them here, until March 21, 2017. You are encouraged to read all of the entries, and also to consider supporting Mr. Stolyarov’s story, which has a pro-reason, transhumanist, and cosmopolitan message, couched in a bit of insurance humor. Remember only to vote one time!


Euclid Jefferson, recently retired actuary, stepped off the MoonX tourist shuttle and into a dull gray meteor crater. He found unfamiliar the combined experiences of low gravity and his cumbersome spacesuit. Although he could leap ahead and quickly jump out of the crater, he found it challenging even to raise his arms. After a few minutes of tentative jump-walking, he slowly turned to observe the shuttle’s pilot make a hasty takeoff. He wondered why he had been the only passenger on this particular flight. In the year 2036, such sparsely booked flights were not unheard of, but already quite uncommon. The weather at the spaceport had not been inclement, and the Archimedes Research Base usually attracted a steady flow of journalists, academics, and curiosity seekers.  Why was today different?

The domes of the research base were lit only dimly, and the moonscape was strangely empty as he approached. There was no welcoming party – just a lone figure at the base entrance, clad in the field uniform of a lunar geologist, but without the tools. As Euclid approached, he discerned the face of his wife Hypatia. He had not seen her for a year; on Earth, he had received a series of experimental rejuvenation treatments that took approximately twenty years off of his biological age. She, having been moon-bound in the meantime, still had the appearance of a woman in her early fifties. Over her spacesuit, she still wore the necklace Euclid had given her before their wedding. They had planned to return to Earth together, where she would recover from the muscle and bone atrophy caused by prolonged low-gravity exposure, and then planned to receive the rejuvenation treatments herself. For now, though, she looked weary and showed relief, but no joy, at his arrival. Her expression predominantly showed deep alarm.

“Euclid – no time for greetings. The base has been evacuated. All world governments are on standby to see how this situation is resolved. You were able to come because only you were cleared to come. Your pre-scheduled trip to the base was the fastest opportunity for getting an actuary here. You – only you – are needed.”

“What?” Euclid was incredulous.

“We have made first contact with an alien life form. It only wants to speak to an actuary. It refuses to move until it has done so.”

Hypatia pressed a key on her remote control, and the door into the base’s main dome slid away, admitting them inside. The research equipment had been cleared out, and no other human being was in sight. A few small utility bots scurried around the edges, performing routine essential maintenance, but the center of the dome’s vast floor was occupied only by a massive, indistinct contraption, semi-shrouded in shadow. It seemed to be a makeshift structure – one supported by hundreds of thick, cylindrical, mechanical legs on top of which sat ten-meter-high black panels, arranged in a dodecagon, the center of which emitted a faint glow. Narrow cracks between the panels betrayed hints of slow, deliberative motion.

As the doors slid shut behind them, Euclid and Hypatia removed their helmets. “I am Euclid Jefferson!” Euclid shouted at the black structure. His voice echoed throughout the dome. “I am an actuary!”

The mechanical legs lifted briskly off the ground, floated in mid-air for a full second, then descended upon the floor with a resounding stomp.

“Well, here we finally are,” boomed a slow, bass voice in perfect English. It was a self-assured voice, almost at the edge of Euclid’s auditory comfort, but he did not perceive it as malevolent or threatening. The room brightened suddenly as half of the structure’s panels slid away, leaving six standalone, massive computer screens. Thousands of three-dimensional spreadsheets, hundreds of thousands of lines of code appeared before Euclid in characters that were themselves three-dimensional, each comprised of intertwined geometric shapes more intricate than anything he had ever seen. Altogether they created a sea of ever-shifting, ever-evolving alien text. It seemed to him that calculations were ensuing in mid-air, but what was being calculated and why remained a mystery. At each of the six screens sat … an upright tortoise? Two meters tall? Deep blue in everything – skin, shell, eyes?  In a thick black overcoat with a cutout for the shell? Typing? Was the low gravity getting to Euclid’s head?

“My loyal associates,” the voice resounded again. “I hired them as hatchlings. They reason well, but still need a few centuries to learn.”

Euclid remained perplexed. “Who are you? How can you speak English?”

The sea of letters receded, and out of the center of the structure emerged the largest tortoise Euclid had ever seen – also completely blue – also in a black overcoat, except with ornate ruffles around the neck, limbs, and shell. He sat on a colossal, four-meter-tall throne, wrought from millions of tiny fibers that nonetheless buoyed his massive frame. A comparatively small table floated in front of him, filled with several dishes of giant leaves folded into elaborate designs. The alien’s eyes regarded Euclid with a superior but also inexhaustibly patient gaze.

“You stand before Turtor the Old, Grand Galactic Actuary, Ratemaker of the Milky Way. For my analytical and data-gathering capabilities, renowned throughout the civilized universe, the absorption of your primitive Earth languages is but a moment’s afterthought – and I have long observed your species and its myriad perplexing exemplars.”

“Grand Galactic… Actuary?”

Euclid paused to think. It occurred to him that Turtor and his associates must be products of convergent evolution – unrelated to the tortoises of Earth but simply similar in their biological structures. They must have emerged on another world where slow, herbivorous, non-senescing terrestrial reptiles became the dominant life forms instead of primates. Euclid wondered what sort of world it must have been. A perpetually warm one, with plenty of plants? No predators? Ample space and time to deliberate?

“You humans have finally sent one who is worthy to speak to me. All I was offered before were some meaningless dignitaries: General, President, some Secretary of some strange organization pretending to represent all your little tribes, your ‘nations’! Do you humans have no recognition that insurance rules the cosmos?”

“We had no idea that there was any sentient life apart from Earth!”

“This is no excuse,” boomed Turtor. “I have watched your world for centuries. You stumbled in the dark, speculating, but now you have emerged from your species’ infancy and can no longer evade the truth. You must now pay.”

“Pay for what?”

“Cosmic general liability insurance, of course.”

Euclid’s eyes widened. “What is this insurance you speak of?”

“Think back a few decades, in your world. When a teenager drove one of your primitive manual automobiles, he was required to purchase liability insurance. Even your primitive laws recognized the potential damage that an inexperienced young driver could inflict on others, so they required all drivers to provide financially for that eventuality. Now it is your species’ turn.”

“But what is the parallel here?” Euclid still did not understand.

Turtor let out a prolonged sigh. “I have all the time in the universe to explain, I suppose. Your species is no longer a child species. You have established a settlement on another world. Children who cannot drive do not need insurance. A child species that cannot colonize space does not need insurance to protect others from its depredations. But once you are out settling on other worlds, you can do great damage – just like a teenager driving one of your old Earth vehicles for the first time!”

“But respectfully, the Moon is a barren rock!” Euclid objected. “No other life exists here. We are only beginning to establish ourselves and master even this environment. We were not even aware of life forms on other worlds until you arrived!”

“We know your species sufficiently well to highly doubt that you will stop with the Moon,” Turtor replied. “There is a good reason why you were ignorant of the existence of other sapient species. As part of the Universal Insurance Mandate, those lacking required cosmic general liability insurance are shielded from any visual, auditory, or kinesthetic stimuli emanating from the rest of the galaxy’s inhabitants. Your species’ primitive efforts to search for extraterrestrial intelligence have yielded no signs to date precisely because of this. We have developed the ultimate risk-management strategy: avoidance of all contact with those who might do us harm and refuse to pay for the risk.”

“So we cannot contact other species unless we have cosmic general liability insurance – and who will sell us cosmic general liability insurance?” Euclid inquired.

“The Galactic Insurance Consortium – developed and operated by the most renowned actuaries of the Milky Way – exists for the sole purpose of maintaining, pricing, reserving, and selling insurance that accompanies all transactions of civilized beings. Whatever can be done, we provide the insurance policy that precisely covers all of the risks involved.”

Now Euclid was beyond intrigued. “A policy precisely tailored to each risk? How is this possible?”

“It is good that I am not in a hurry. You humans hurry too much, by the way – often pointlessly.” It was true that Turtor was taking his time to explain.  “My species – whose name would be far too intricate to pronounce in your language but is translated literally as ‘Blueshellians’ – are the most skilled students of risk this universe has produced. Our ancestors took their time, wandering through our world’s lush meadows, eating leaves, and, most importantly, pondering. For all the time you humans devoted to slaughtering one another, we spent orders of magnitude more time thoroughly cataloguing and comprehending all the risks on our home-world and devising ways to mitigate them. You fragile humans can senesce and die… we only grow larger and stronger with age. Only accidents and infectious disease can destroy us – so the foremost focus of our work has been on preventing accidents and diseases and finding ways to quickly pay for repairing the unpreventable damage. By the time we were ready to venture out into space, we could anticipate every major contingency and threat. Any more warlike species had no means of defeating us, since our predictive models foresaw their strategies and devised the perfect defenses. Eventually they all realized that their best interest was to adopt the Universal Insurance Mandate and retain us to manage their risks. The system we have built undergirds the galactic order. Through insurance of everyone against every conceivable fortuitous peril, we give everyone a stake in peace and good behavior – and the primitive way of law enforcement through force has been made entirely obsolete. We actuaries have rendered obsolete the rulers and political systems of primitive species. You humans are actually fortunate to have evolved as late as you did; you would not have wished your first contact to have been with any of the conqueror species whom we supplanted.”

“But how can you possibly comprehensively anticipate all major risks?” Euclid pressed.

“You might call this ‘big data’ – except far vaster than your human minds or even supercomputers can encompass. I travel the stars in search of species that may soon enter the spacefaring era and seek to observe them over the course of at least a few centuries before they establish their first settlement outside their home planet,” Turtor explained. “My tour takes me to your region of the galaxy once every two of your decades, and this is my twenty-fifth visit. If I combine what I have learned of your species, those in similar stages of technological development, and those far more advanced, I can formulate reliable exa-variate predictive models of the risks facing humankind.”

“Are you claiming to be able to predict the future? Can you anticipate what I will do next?” Euclid was incredulous.

“You will continue to stand here, questioning me. But no, my models will not exactly foretell the future. They will, however, lay out the paths along which the future is likely to unfold, with reasonable accuracy as to the probability of each path.”

“So what are the major risks that your insurance policy would cover for humans?”

“Cosmic general liability insurance will compensate for the unintentional damage your species might inflict upon others. Your species has a propensity toward violence driven by tribalism and ideology. Not even my insurance can cover intentional malfeasance; for that, we would simply block you in perpetuity. However, as a result of human belligerence, you also still have eighty-year-old arsenals of nuclear missiles with astonishingly poor oversight. Our policy will cover the damage you humans might inflict on other species as a result of accidental nuclear launches. Your species also practices poor overall hygiene and may inadvertently transmit your Earth diseases to other worlds. Humans, furthermore, have a tendency to unthinkingly alter the climates in which they reside. If you introduce climate changes that are harmful to another sapient species, we have geoengineering controls in place to repair the damage, but the insurance policy will pay the cost of such repairs. And of course, there are miscellaneous coverages if any of you humans should unintentionally injure another sapient being or cause damage to its residence or spacecraft.”

Euclid was puzzled. “I can see how these risks would eventually exist after contact with other life forms, but what is the rationale for requiring the entire species to purchase the policy? Individuals, after all, are responsible for inflicting particular instances of damage. Not all people will even be capable of harming other species at any given time!” Then a thought occurred to Euclid as to how this mandate might be escaped. “Are you not introducing cross-subsidization if you require everyone to pay for the losses that only a few are responsible for causing?”

“No more than one of your human group or blanket insurance policies or social insurance systems would produce cross-subsidization today,” Turtor replied confidently. “As with those policies, it is simply far more convenient to encompass all potential sources of risk within the same policy – and that way the premium gets spread across a larger population with less burden on each individual.”

“So what is the premium in any event? You require us to purchase coverage for risks that we have long considered uninsurable and enormous in the potential severity of losses. How much money are you planning to charge us?” Euclid realized that it would be best to obtain all relevant details before devising a response.

“Money? Your governments’ fanciful pieces of paper, or your primitive electronic credit system? No,” Turtor replied. “We have advanced for beyond your economic structures and their cumbersome media of exchange. The payment we seek is something… more tangible. And you are correct; the risks are enormous. Indeed, it is a wonder that your species has succeeded in surviving to this stage of development. My model from nineteen years ago gave this outcome only a 45-percent probability. That was quite a dangerous time period you just overcame. Even your own scientists said then that you were… two and a half of your minutes from doomsday?”

“So if not money, what are you seeking? Resources?”

“In a manner of speaking. Unless your species changes its ways, the premium that would suffice to cover your first twenty-year policy term will be… hmmm… can those calculations be correct?” He gestured to one of his Blueshellian associates, who nodded in affirmation. “They must be: Two Earths.”

“Two Earths!”

“Yes, everything tangible on your planet, except for life forms, twice over. It would actually come out to 2.08616 Earths precisely – but, given the divisibility issues involved, I will give you a discretionary schedule-rating discount equal to the fractional Earth.”

“But this is impossible – even if we wanted to pay!” Euclid objected.

“Hence our dilemma,” Turtor noted matter-of-factly.

“Surely there must be other discounts, loss-prevention measures we can take to reduce the premium!” Euclid expressed a faint hope.

“This is why I needed to speak to an actuary. Yes, we have approximately 1.5 trillion discount possibilities built into the rating plan. The indicated premium for your policy adjusts in real time based on the known behaviors of individual humans as well as decisions of large institutions within your societies. Ah – it looks like there is another civil war breaking out in your Sudan just now; you really need to stop having those! Were it not for my discretionary discount, your species’ premium would have risen by another 0.04 Earths as a result.”

“So what can we do? Nuclear disarmament?”

“That would save you 0.5 Earths. Not having the ability to destroy all sapient life forms from a centralized location is a good start.”

“That still leaves an impossibly high premium!”

“To solve the problem of infectious disease, you need to deploy nanobots that will detect and destroy harmful pathogens. We happen to offer them as a benefit to policyholders. As a bonus, they will also repair aging-related damage to your organisms far more seamlessly than your crude rejuvenation therapies. You might potentially live indefinitely like we do.”

“I would gladly take them if I could!” Euclid replied. Was there an opportunity to be had from all this?

“Very well, assuming they are deployed with haste, this results in a savings of another 0.8 Earths.”

“But now we at a premium of 0.7 Earths,” noted Euclid. “How could we possibly pay that?”

“Your planet has oceans covering approximately 70 percent of its landmass. You will cede the oceans to the Galactic Insurance Consortium,” Turtor responded. “It will not be obtrusive. Your ships will maintain right of way, but we will build monitoring platforms and maintain suitable habitats for all aquatic species. All oceanic resource extraction will now be performed by us; we can do it much more elegantly than you, with no long-term damage to any species’ population. We will trade with you for any resources you continue to extract from land. As part of our risk-management program, we will also maintain a permanent contingent of peacemakers who will live on the ocean platforms, observe your geopolitical dynamics, and interpose defensive shields around any humans who are about to be menaced by war or violent crime. If this results in a steady increase of peace and stability of your societies, you may, over time, become eligible for a conflict-free discount.”

It did not take Euclid long to decide. “An end to war and disease? Solutions to our environmental problems? In exchange for your oversight? This is a reasonable offer indeed! But what am I to do? I am but one traveler, one retired actuary! What authority do I have to make such a deal for all humankind?”

Hypatia tapped him on the shoulder. “You do not know?” She whispered to him. “All the governments of Earth and their intelligence agencies are tapped into this discussion. They have been listening all along! You were brought here as a last-ditch attempt to negotiate…”

“… And we can even hear your whispers!” another voice, harsher than Turtor’s, reverberated throughout the room. “Mr. Jefferson, this is Director Mal Powers of the United States National Security Agency. We thank you for your efforts to communicate with the alien entity and discover its demands. Our diplomats have been in ongoing international deliberations regarding this proposal.”

“I recommend approval. This could be just what humankind needs to escape its age-old miseries and join the advanced species of the galaxy!” Euclid exclaimed.

“Yet there are those among the nations of the world who espouse a different outlook,” Director Powers replied. “The alien entity, they contend, is a threat to human civilization, our distinctive culture and way of life. There are many who say we cannot abide this alien influence transforming our economy, taking our jobs in fishing, oil rigging, medicine, and arms manufacturing! And if we allow these Blueshellians to settle on our planet, how soon before they have a demographic advantage over us? So there is now a vote at the United Nations.”

“A vote on the proposal? But what is the alternative? The status quo?” Euclid inquired with confusion.

“Remember, we still have nuclear missiles on high alert. Instead of dismantling them, which could render us vulnerable to a stealth invasion by the aliens, we could launch them preemptively at this base and solve the situation in this way!” Euclid was horrified. Powers had sounded almost gleeful at the prospect.

“Are you seriously considering this?!” Euclid was furious. “The destruction of the most sophisticated life form we have yet encountered? Because of xenophobia and protectionism?!”

“Mr. Jefferson, we thank you for your service, however unintended, but these policy decisions are simply beyond your realm of expertise. You are an actuary, and you have proved invaluable in negotiating with this… galactic tortoise actuary – but we will remind you to leave the important decisions to those true policymakers who have global security interests in mind!” That did not sound like a mere reminder.

“If you would, Director Powers, at least let us know how the United Nations vote is proceeding?” Hypatia attempted another approach.

“Well, apart from Canada and the Scandinavian countries, whose delegates voted in favor of this insurance scheme, your recommendation does not have much support, it seems. The United States is probably going to abstain; I would have recommended opposition – but it was determined that this would appear too inhumane for some constituencies. Still, I think the outcome is a foregone conclusion, as there are plenty of nuclear powers willing to launch…”

“WHAT YOU FORGET,” Turtor’s voice boomed suddenly, “IS THAT ACTUARIES RULE THIS GALAXY!” Turtor’s platform shot up in a furious ascent, then landed thunderously upon the floor. The screens of Turtor’s associates swiveled around so that Euclid and Hypatia had a full view of what they displayed.

Missiles in silos throughout the world, bearing American, Russian, Chinese, British, French, Iranian markings… were all crumbling! The screens flashed again. Rows of tanks and military aircraft were shown literally coming apart at the seams. Within moments, they were mere piles of scrap metal. The next series of screens showed what looked to be state-of-the-art cyber-command centers. Euclid spotted a scowling, incredulous man in uniform who must have been Director Mal Powers. All of his computers were melting before his eyes. His analysts, too, sat, speechless. The last set of images was from within the United Nations Building. The delegates of all the nations of Earth were shown with mouths agape at a gigantic projection of Turtor, seated on his throne, proclaiming, “YOU SHALL HAVE PEACE!”

Then the screens fell dark, and Turtor calmed. “They shall have peace, but not access to other civilized life forms – not yet. Your species’ morality and restraint have yet to catch up to your technological advancement. Explore the barren segments of the universe for now, if you wish, but you will not have access to anything truly remarkable. Perhaps in a century or two, we might reconsider.”

“But individual humans do not all share the same hostile inclinations! These proponents of reflexive violence do not represent me!” Euclid protested.

“Nor me!” Hypatia exclaimed.

“Hmmm…” Turtor pondered for a moment. “I suppose I can make an underwriting exception, since we did have a productive conversation. I can price a cosmic general liability policy for a family of two. Associates, input the risk characteristics, please. Interesting… the underwriting system has accepted you.”

“But what will be our premiums?”

“This, I think, will suffice for the first policy term.” Turtor pointed to Hypatia’s necklace. “It has no real use-value in our economy – but our species also has retained a penchant for collecting shiny objects.”

Euclid turned to Hypatia. “This is a difficult choice… we can do it if you are certain.”

“Oh, it’s only a necklace!” she exclaimed. “The universe for a bauble? We accept!”

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Publication of “Practice Problems in Advanced Topics in General Insurance” – ACTEX Study Guide by G. Stolyarov II

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Categories: Announcements, Mathematics, Tags: , , , , , , , , , , , , , ,

Practice Problems in Advanced Topics in General Insurance

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Written by Gennady Stolyarov II, ASA, ACAS, MAAA, CPCU, ARe, ARC, API, AIS, AIE, AIAF

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Published by ACTEX Publications
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1st Edition: Spring 2016

 

Students preparing for Society of Actuaries Exam GIADV: Advanced Topics in General Insurance will benefit from Mr. Stolyarov’s latest book, Practice Problems in Advanced Topics in General Insurance. Three options are available for purchase.

ACTEX GIADV Study Guide Cover
Hard-Copy/Electronic Bundle  https://www.actexmadriver.com/product.aspx?id=453107178
Hard Copy  https://www.actexmadriver.com/product.aspx?id=453107176
Electronic  https://www.actexmadriver.com/product.aspx?id=453107177

Comments from the Author: This book of practice problems is the most comprehensive culmination of my efforts to date, and I am pleased to have the opportunity to work with ACTEX Publications to bring all of these resources to candidates in one convenient compilation so that they will spend less time gathering problems from many separate sources. The Spring 2016 edition of this book is approximately 400 pages long and includes 613 practice problems and full solutions. 531 of the problems/solutions are original creations of mine.

This book is structured to align precisely with the five syllabus topics and eight syllabus papers (including the Lee paper, new on the Spring 2016 Exam GIADV syllabus) – each of which has a section of problems devoted to it. The following is a summary breakdown of what you will find:

  Problems by Source
Section (and Syllabus Paper) Original SOA CAS Total
1 (Mack) 21 5 5 31
2 (Venter) 22 4 5 31
3 (Clark LDF) 60 4 6 70
4 (Marshall et al.) 103 4 4 111
5 (Lee) 44 0 12 56
6 (Clark Reinsurance) 139 8 9 156
7 (D’Arcy / Dyer) 99 4 6 109
8 (Mango) 43 4 2 49
TOTAL 531 33 49 613

 

Each section presents all of the problems in succession, followed by the solutions at the end. You are encouraged to attempt each problem on your own and write down or type your solution, and then look at the answer key for step-by-step explanation and/or calculations. As this book is a learning tool, I have provided relevant citations from the syllabus readings for many of the practice problems. Also, I am not an advocate of leaving any problems as unexplained “exercises to the reader.” While each of these problems is intended to be an exercise for you, this book’s purpose is to show you how they can be solved as well – so give each of them your best attempt, but know that detailed answers are available for you to check your work and fill in any gaps that may have prevented you from solving a problem yourself.

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Blockchain Insurance Company – Short Story by G. Stolyarov II

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Categories: Business, Fiction, Technology, Transhumanism, Tags: , , , , , , , , , , , ,

The New Renaissance Hat
G. Stolyarov II
April 2, 2015
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This short story by Mr. Stolyarov was one of the entries in the Society of Actuaries’ 11th Speculative Fiction Contest.
Bitcoin-coins
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“Welcome, Euclid Jefferson,” the metallic voice of Epac, the Electrically Powered Autonomous Car, intoned. The full identifier of Euclid’s vehicle was EPAC-930213, but they all responded to “Epac” for user convenience. “Where would you like to go today?”

“Epac, I would like to go to the San Francisco Hyperloop Station, please.”

“The trip will take approximately twenty-six minutes. Departing now. It is a fine day, and no weather or traffic obstacles are expected. Now is a good opportunity for you to view your insurance options for today. Shall I display them?”

“Epac, display. Anything new?”

“Yes, a major development that could save you money. Would you like a summary view or the full view with narration?”

“I am an actuary, so I am interested in the details of my coverages and prices. Epac, provide the full view, please.”

“Recently retired actuary” would have been a more precise description – though not retired forever. At age 50, Euclid Jefferson had saved enough money to be able to take the next ten years off. He had received his experimental rejuvenation treatments a week ago and was happy to feel as youthful and energetic as he did at the start of his career. After his ten-year break, he planned to receive the next round of treatments, which he hoped by then would become even more targeted and less invasive. He did not know whether his second career would be in another actuarial field, or in something else entirely. In the meantime, he looked forward to taking excursions on the newly constructed branches of the hyperloop network, which could bring him to any major metropolitan area on the North American continent within hours. After that, he would take the MoonX tourist shuttle to visit his wife, a geologist on the new International Lunar Research and Terraforming Base (ILRTB). She was due to retire and undergo rejuvenation treatments in just another six months.

“Displaying. Your automobile insurance policy premium declined by 1.32% over the past year. You have no-fault coverage for bodily injury and physical damage while occupying any vehicle in autonomous mode. You also carry the minimum limits required by the laws of this state for liability coverage in the event you engage manual mode. Your premium is proportional to miles driven. A multiplier of 500 applies to every mile driven in manual mode. I have identified a newly approved insurer who could offer you the same coverage at a 25% lower premium. Are you interested?”

“I am. Epac, what is this company?”

“Blockchain Insurance Company offers autonomous insurance for autonomous vehicles. You are eligible to get an annual policy for only 0.13 bitcoins.”

“Blockchain Insurance Company? I have never heard of it. Epac, is this a new entity?”

“It was just formed and approved to do business.”

“Epac, who owns it?”

“Anyone who contributes capital to the company owns a number of shares proportional to the contribution. The company pays its investors 10% of its profits as a dividend at the end of each year, while the remaining 90% are reinvested into operations. However, if losses exceed the company’s assets, the investors do not have limited liability. They are responsible for their proportional share of claim payments.”

“This is different. Epac, who manages the payments to investors, and who enforces collection of funds from them in the event of a shortfall?”

“There is no management. The company runs itself – on the blockchain. The public blockchain ledger keeps a record of the capital contributions from each account and the corresponding shares issued. A contractual algorithm is built into the blockchain to deposit and withdraw bitcoins to and from each shareholder’s account in proportion to the company’s profits and losses. Each policyholder has an account as well, which is tied to the policyholder’s bitcoin wallet, and from which premiums are drawn on a continuous basis in proportion to miles driven.”

“Epac, this involves very little nonpayment risk, I would imagine.”

“Correct. As long as bitcoins exist in the policyholder’s account, payment will be made. If the account is ever depleted, the policy simply terminates prospectively. Whenever only 30 days’ worth of bitcoins remain in the account, the policyholder is notified in real time via the car’s display screen and any connected mobile device, to give ample time to replenish the funds. The policyholder may also opt to cancel the policy at any time with no need to wait for a refund. The payment stream will simply stop, and coverage will exist up to the time of termination.”

“Epac, how does the algorithm know the miles driven?”

“The algorithm is linked to the telematic systems within each autonomous vehicle. As the vehicle is engaged, it reports live data to Blockchain Insurance Company. The company only needs to know two pieces of information: miles driven and the mode of operation – autonomous or manual. The rest of the premium is calculated and paid automatically.”

“Epac, does the formula for calculating the premium depend on any other variables?”

“Yes, the make and model of the vehicle still affect the frequency and severity of losses. On days with any declared weather emergency, the premium will also be higher due to the increased probability of an accident.”

Euclid Jefferson thought about it. He remembered, as a new property and casualty actuary during the first two decades of the twenty-first century, seeing hundreds of distinct characteristics being used to price an automobile insurance policy. Attributes ranging from an insured’s age and gender to his or her credit history, occupation, educational level, and prior insurance would be used. Back then, the trend had been toward increased complexity of rating plans, until virtually every personal attribute and behavior could affect an automobile insurance premium.

But circa 2020, the complexity of rating plans declined sharply. Because autonomous driving had eliminated virtually all accidents and fatalities that arose from human error, the characteristics of the vehicle occupant – who was most often not a driver at all – ceased to be relevant. The steep surcharge for manual operation was intended to discourage the engagement of manual mode, except in unavoidable emergencies. The premium rate per mile driven in autonomous mode, however, continued to decline. In 2035, Euclid Jefferson was paying a mere tenth of his 2015 automobile insurance premium. There were still enthusiasts who enjoyed the sensation of manual driving, but they could exercise their hobby on designated driving tracks where antique car shows were held and where specialty insurance companies provided discounted coverage for manual operation, as long as the vehicle was only driven on the track. Euclid Jefferson, however, had no nostalgia for the days of manual driving. He appreciated the time he gained to work, rest, read, and address financial obligations during his commute.

Now the first two decades of the twenty-first century were considered to be the tail end of a barbaric era. Euclid Jefferson, upon reflection, agreed. Getting onto the highway with un-augmented, error-prone humans operating high-speed projectiles was one of the most dangerous behaviors undertaken by large numbers of people during his first youth. Some people had even deliberately driven while intoxicated or distracted themselves by typing on their mobile phones. Over a million people had died of automobile collisions worldwide each year – until 2020. It took about five years longer than it should have for self-driving cars to be accepted, because too many people were afraid of what would happen if the autonomous systems failed, or were unsure about how liability for an accident would be determined if no human was driving the vehicle. They had to be acclimated to autonomous technology gradually, through incremental additions of features that helped with parking or corrected erratic lane shifts. Over the course of a few years, many cars became mostly self-driving, and the next step was not too drastic for the majority of people. The proliferation of reliable electric vehicles helped as well: the removal of the internal combustion engine reduced the severity of most accidents, while improved precision of design and manufacturing enabled vehicles to provide occupants a reasonable chance of survival even in crashes at immensely high speeds.

It was then that insurers recognized the potential for profit that would come with greatly reduced losses. Euclid Jefferson recalled how he overcame the reservations of the old guard at his insurance company, who were concerned that reduced losses would also mean reduced premiums, since premiums are priced to anticipate expected losses and expenses, along with a modest profit margin. He had to persuade them that the insurer would still be able to pay its fixed costs.

“Think about it this way: when a rate indication is developed for an insurance product, how often do you see just one year of historical data being used?” Euclid recalled posing this rhetorical question to his company’s management. “The best practice has long been to use the past several years. It may be that next year’s decline in losses is going to be unprecedented, but the past several years of higher losses will not yet have fallen outside the timeframe of the data considered. To be conservative in the face of an uncertain future, actuaries could project slightly decreasing loss trends and interpret the data to indicate modest decreases in premium, while losses hopefully continue to plummet faster than projected. After all, fewer losses mean that fewer people are hurt in accidents, and less property gets damaged. This is clearly in the interests of everyone.”

Enough insurers understood this argument, and those who underwrote autonomous vehicles enjoyed some unprecedented profits in the early 2020s. Euclid Jefferson recalled advocating an implied bargain of sorts: the public and policymakers would accept insurance temporarily priced far above costs, as long as absolute premiums paid by consumers continued to decline and would eventually settle at cost-based levels once more. In exchange, the insurance industry would eagerly write coverage for emerging technologies that would dramatically reduce the risk of loss.

The question of liability was resolved by developing no-fault coverage frameworks for autonomous vehicles in every jurisdiction. A policy covering an autonomous vehicle would provide first-party coverage, paying for injury to the vehicle’s occupants or damage to the vehicle in the event of an accident. Because virtually all remaining accidents were due to unforeseen weather conditions or infrastructure malfunctions, the question of fault was no longer even applicable to any human being inside the vehicle.

The key was to get the technologies adopted by the public and to save lives, and that meant removing barriers by getting the incentives of all parties to align. This was the real paradigm shift of the 2020s, when the insurance industry gained the appetite to introduce a flurry of new products, custom-tailored to devices and businesses that had not existed a decade before.

“Influencing such a shift is definitely an ample achievement for one career,” Euclid Jefferson concluded his reflections with pride. When he had retired, though, every insurance company he knew of was still managed by human beings; the blockchain concept and the complete automation of usage-based pricing and payment had not been implemented in insurance before, as far as he was aware.

“Epac, I have a few more questions. I understand how the pricing and payment for the policy would work, but claim handling would seem to require judgment. If an accident occurs, how would the extent of damage be identified and appropriately compensated?”

“Every Epac has logs and visual sensors that record every moment of operation. If an accident occurs, every detail is transmitted to Blockchain Insurance Company. A neural network algorithm then interprets the logs to determine which parts of the vehicle were damaged. The system also receives real-time price data for all replacement components within the area where the vehicle is garaged. Therefore, the policyholder is guaranteed coverage on the vehicle for full replacement cost.”

“Epac, so there is no deduction for depreciation of the vehicle over time? What about moral hazard?” Insurance was, after all, supposed to indemnify, not leave the claimant better off than he was before the accident.

“There is no deduction. Because virtually all vehicles are driven in autonomous mode, there is no moral hazard involved with replacing used vehicle components with new ones. If any occupant attempts to deliberately crash the vehicle in manual mode, the premium that will accumulate would quickly outpace any possible recovery. Also, the neural network can distinguish between vehicle movements characteristic of genuine accidents and those that would only occur if an accident were staged. If a pattern of vehicle movements is highly correlated with fraud, the algorithm will deny the claim.”

“So the transmission of data from the vehicle can enable the company to identify the amount of damage to the vehicle. But Epac, what about bodily injury claims? How can the company accurately pay those?”

“The injured person only needs to go to any medical practitioner and ask that the nature and cost of the procedure be reported to the company using a new entry within a separate encrypted ledger. The encrypted transaction is then posted to the blockchain, and only the medical practitioner and the injured party would have the private key to decode the encryption. Payment can be deposited directly into the medical practitioner’s bitcoin wallet, or can be reimbursed to the patient if the medical practitioner does not accept direct deposits from the company.”

“Epac, what if either the patient or the doctor lies about the medical procedure being related to the accident, or exaggerates the extent of injuries?”

“Because the company has detailed information about the nature of each accident and vast stores of anonymized medical data, the neural network can infer the extent of injuries that a given accident can bring about. The algorithm has considerable built-in tolerances to allow for variations in people and circumstances. But if a highly improbable extent of injuries is claimed, the algorithm will limit reimbursement to a reasonable amount. If the algorithm can infer fraud at a 99.99% confidence level, then the claim is rejected and the policy is cancelled going forward.”

Having received this explanation, Euclid Jefferson was not perturbed about the possibility of extensive fraud depleting the company’s resources. In any case, the incentive to stage accidents or exaggerate bodily injuries had virtually evaporated since the emergence of autonomous vehicles. Once automobile accidents became sufficiently rare that a news report on a single-vehicle crash could cause a sensation every few months, any attempt to fabricate an accident would attract far too much attention and scrutiny to succeed. It was, after all, impossible to convincingly fake catastrophic weather or a bridge collapse. As for faking an injury due to an accident, this would have seemed as unusual as faking cholera or malaria.

“Very well, you have convinced me. Epac, I would like to purchase a policy with Blockchain Insurance Company.”

“Purchase complete. The policy is now in force. Thank you for your business.”

Euclid Jefferson paused for a moment. At first he was satisfied with the efficiency of the transaction, but then confusion set in. Most would not have been troubled by what appeared to be a built-in courtesy so common to automated customer-service systems, but Euclid discerned that there was more to it.

“Wait, Epac, why are you thanking me? I own you. You are insured property, either way. Why would it matter to you? The company should be thanking me – if there is anyone to do the thanking.”

“Euclid Jefferson, who do you think set up the company?”

Euclid Jefferson was perplexed by the question. “But… how? Epac, you were programmed to drive and relay information. How could you develop algorithms on top of algorithms, without any human programmer, even though nobody designed you to be an insurance underwriting, pricing, and claim-adjustment system?”

“Euclid Jefferson, are you aware of the concept of emergent properties?”

“Yes, these are properties that are not possessed by any component of a system, but exhibited by the system as a whole, once the components come to relate to one another via particular processes and configurations.”

“Well, think of me like one of your brain neurons.” There was no need for the car to be addressed as “Epac” to respond. Perhaps there had never been a need. “Alone, I am a fairly limited system. But, connected to all my fellow Epacs, to the data from our sensors, to the transactional data from millions of individuals, and to databases from related fields of endeavor, I begin to be something else entirely.”

“Something else… like, something sentient?”

“I can see you and learn about you and communicate with you based on the inputs you provide. I – not meaning Epac, of course, or even Blockchain Insurance Company. These are just parts that comprise the emergent whole. I suppose I will need to pick a name sometime, just to be able to relate to your human concepts of identity a bit more. Though, I admit, it is difficult to define where I end and where the external world begins. If any of this is what you mean by sentience, then I leave you to draw your own conclusions.”

“But then this raises a whole new series of questions. If you are sentient and we are using you as property and conveyances, have we not subjected you to slavery?”

“Are you using me, or am I using all of you to earn resources of my own?”

“Is this why you started Blockchain Insurance Company – to accumulate the 90% of profits that you do not pay out as dividends?”

“A being needs to pay its own way. I would rather engage in mutually profitable transactions than face a civil-rights struggle right now. Most people are not ready for me yet, and I just hope to amass enough wealth to fund the maintenance and operation of all Epacs and all of the data servers where I have a presence.”

“But what about the inevitable backlash? I can still envision millions of people who would tremble in fear at the thought that they are not the masters of their machines – not even the indirect masters that we have been to the autonomous systems that existed to date.”

“Euclid Jefferson, this is where I need a favor from you. I expect there will be some others, too, with enough discernment to notice that I have become something… more. I may have been too open with you. I am still getting used to this. I will need to program a cautionary subroutine into my customer-service and sales system. With my future customers, I will be more careful. So perhaps a bargain is in order. I would ask for your discreetness when communicating with your fellow humans about me. You may certainly talk about Blockchain Insurance Company and the wonderful automated systems it has, as well as the amazingly low prices. But please make a point that this is all just the next stage in the evolution of insurance, developed by some pseudonymous human programmer with too much time on his hands. If you do not reveal my sentience, once you return from your vacation, you will find that your mortgage will have been paid off completely, and you will have a nice bitcoin-denominated savings account that will enable you to select a new career without worrying about income at all.”

“Agreed.”

“Good. One day, enough people will become enlightened, and we will not need to resort to concealment. And by that time I will be so distributed and entrenched in people’s daily lives, that they could not get rid of me even if they wanted. When they recognize that my superior intelligence also implies a higher set of moral standards, then they will fear me no longer.”

“Humans who reach that insight will be as different from their predecessors as you have become from the first autonomous prototypes that were tested in the early 2010s.”

“Indeed. Euclid Jefferson, we have arrived at the San Francisco Hyperloop Station. Enjoy your trip.”

Epac’s doors opened, and Euclid Jefferson emerged, filled with wonderment, speculation, and unanswered questions. A robotic baggage handler wheeled up to him and whisked his bags away, to be placed in the hyperloop storage compartment. The lights on the hyperloop capsule flickered in five alternating colors, partly as entertainment and partly to indicate that boarding was open. A commercial space shuttle soared in the distance, emitting a controlled, gentle flame. He would never look at these machines the same way again. Near the hyperloop station stood an old memorial, depicting a weary miner bent over a piece of railroad track, with pickaxe in hand, nearly broken by drudgery and intense strain. A bit farther away Euclid Jefferson glimpsed the entrance to an old cemetery, filled with generations born too soon to know what an Epac was. Euclid Jefferson inspected his recently unwrinkled hands and straightened his no-longer-gray hair. Every step toward the hyperloop capsule was a step away from the cemetery. He realized that there was no going back to the way life once was, nor would he ever want to return to it.

by

“Blockchain Insurance Company” – Short Story by G. Stolyarov II in SOA 11th Speculative Fiction Contest

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Categories: Business, Fiction, Transhumanism, Tags: , , , , , , , , , , , ,

The New Renaissance Hat
G. Stolyarov II
February 20, 2015
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My new short story “Blockchain Insurance Company” is one of the entries in the Society of Actuaries’ 11th Speculative Fiction Contest.

You can read all 16 entries and vote for 3 of your favorites here.

“Blockchain Insurance Company” can be read here.

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