When Australian insurer HIH collapsed a couple of years ago, one prescient commentator suggested that it was just the beginning of the collapse of the insurance industry world-wide.

Locally the problem was the combination of an under-resourced regulator APRA under enormous pressure from the wide boys in the industry who were touting complex and innovative schemes in a newly competitive environment. The fact that these schemes were deeply imprudent was constantly either concealed from the regulator or dressed up as the new economy model that the APRA folks were kept constantly on the back foot trying to unravel.

But those schemes were not the unique invention of HIH, they were percolating throughout the Insurance business as surely as dodgy accounting practices were being spread through that industry. Now we are seeing the results. AMP (one of the oldest companies around here) finds itself in major financial trouble, the British industry has just been thrown a lifeline by their regulator because the value of their share holdings is no longer sufficient to meet their liabilities across the board and they were on the verge of dumping shares into the market to recharge their cash reserves and in the process destroying the UK share market. This wont help in the long run as the cash will be needed, an actuarial certainty, for the various liabilities that the companies hold.

Now it looks like the process has crossed the Atlantic as American International Group Inc. (AIG.N), the world's largest insurer, warned that it had drastically underestimated liability claims. The largest insurer in the world had WHAT? What's the betting that AIG had been doing exactly the same thing as HIH? Cutting premiums to compete and "grow" while making insufficient provision for the inevitable claims that would arise? Insurance companies don't suddenly forget the actuarial tables, the tables don't change that much from decade to decade; but greed and stupidity are also constant, and when they get the upper hand we get Enron, WorldCom, AOL/ Time Warner and an Insurance meltdown.

I can hardly wait till the world's derivatives contracts start unwinding.

As well as giving rise to innovative and unexpected behaviours or processes, groups can conceal the most rigid of conforming straightjackets and none more so than places where innovation is supposed to be part of the game.

The unwillingness of NASA officials to hear the knowledge about booster rocket O rings cost the Challenger and its crew. It looks like the knowledge about the potential effects of insulation hitting the shuttle on liftoff may have been in the system, but that "it was concluded that it posed no threat to flight safety".

Engineer's '97 Report Warned of Damage to Tiles by Foam
Columbia Was Beyond Any Help, Officials Say

This is most interesting because the consequences of acknowledging that it did pose such a threat were probably more than anyone was prepared to deal with and therefore closed it out of their thinking. The consequences of course were the conclusion that the 7 people were going to die. They could not return to earth safely and they did not have enough fuel to reach the ISS. Since the return to earth offered the only possible chance of survival, they had to take it. I would like to know who it was who stood there watching the descent, knowing that his decision to burn up the shuttle was the only possible chance they had.

Two cartoonists however, have it right. Tom Toles and Pat Oliphant

Performer Janis Ian has a piece in the LA Times that dots all the i's and crosses the t's.

I began offering free downloads of my songs on my Web site. Thousands of people have downloaded my music since then -- and they're not trying to steal. They're just looking for music they can no longer find on the tight playlists of their local radio stations.

That's how many artists gain new listeners these days -- through the Internet.

After I first posted downloadable music, my merchandise sales went up 300%. They're still double what they were before the MP3s went online.

snip

The Internet allows people like me to gain new fans; if only 10% of those downloading my music buy my records or come to my shows, I've just gained enough fans to fill Carnegie Hall twice over.

With the court's decision, the RIAA didn't just defeat Verizon, the Internet service provider that the RIAA sued. It damaged the viability of recording artists who don't conform to the mainstream musical tastes of the moment.

They quote John Perry Barlow in part ""Intellectual property law cannot be patched, retrofitted, or expanded to contain digitized expression any more than real estate law might be revised to cover the allocation of broadcasting spectrum..."