The Power of Data Mining

Reading about Emerging Adolescence in the NYT, I was particularly annoyed at this:

People can vote at 18, but in some states they don’t age out of foster care until 21. They can join the military at 18, but they can’t drink until 21. They can drive at 16, but they can’t rent a car until 25 without some hefty surcharges.

Rental companies’ decisions are based on insurance data and so are based on behaviour. The rest of these are political artifacts, long ago dressed up in the ‘logic’ of that age but really resting on ugly political deal-making, warped by public choice failures and surviving thanks to status quo bias.

But our author redeemed himself eventually:

The scientists found the children’s brains were not fully mature until at least 25. “In retrospect I wouldn’t call it shocking, but it was at the time,” Jay Giedd, the director of the study, told me. “The only people who got this right were the car-rental companies.”

This is why the auto industry has the capacity to be the most competitive insurance market of all – standardization of coverage and vast amounts of high quality data.