Hurricanes That Wracked Florida During

¶ … hurricanes that wracked Florida during the 2004 season were a nightmare -- not only for homeowners and residents of Florida, but also for the insurance industry. Insurance is traditionally akin to gambling. Customers bet that they will experience a tragic event, and therefore pay monthly payments that pale in comparison to the reimbursement that will follow a disaster of some sort. Insurance companies, on the other hand, bet that customers will not experience a tragedy, and they will reap monthly payments without actually having to provide a service. Just like traditional gambling, the house usually wins. Almost everyone has insurance, and a very few experience disasters that require million dollar payouts. But in Florida during the 2004 hurricane season, the house lost. When making the decision to pull out of thousands of policies and cancel policies, Rommel was biased toward that notion that the house always wins. Although Rommel and Nationwide knew something like this could happen, they did not prepare will for the event. And paying out the policies probably would have put the company into debt. His bias was with the company, preferring to stay afloat and do bad business instead of honoring contacts and going bankrupt, and he was biased in terms of his assumption that the house always wins, and he failed to prepare.

2. When faced with natural disasters such as the ones endured by Nationwide, American Airlines, and Jet Blue, companies must make some important decisions. For instance, they must determine whether profit or reputation is more important, whether customer integrity or the bottom line is of greater significance. They must also decide how to handle the situation with the media, as even sound business decisions can be warped by a man with a camera. In the instances listed in this article, the companies made several errors in decision making, stemming from several biases. Probably the largest bias is the confirmation bias, where decision makers tend to focus on information that supports their opinion. By failing to be prepared for the hurricanes and the extreme weather that caused flights to be grounded, the companies participated in a confirmation bias by assuming things would go their way. The companies also made a crucial mistake when talking to the media before the problem was sorted out.

3. In all three of the cases, companies had to deal with the constraint of the situation being far out of their hands. None could control the weather and none could accurately predict the voracity of the natural disasters. Similarly, the companies had to deal with the constraint of business. Because the companies were large conglomerates, a chain of command had to be followed. No one person could nor was he or she responsible for making large decisions on his or her own. This was a significant constraint in each case in two ways. First of all, a chain of command increases the amount of time it takes to respond to disasters. Second of all, in situations where individuals must make decisions they are unprepared. Thus, the constraints of nature and manpower contributed to the mistakes made by these companies.