Greed of the Gaps

I. The Two-Step, or How Ignorance Became a Licence

There is a sound a man makes on opening his insurance renewal, somewhere between a cough and a verdict, and Derek has just made it. Last year’s premium has doubled. No claim, same house, same cover, same Derek. He reads it twice, as one does, and then he says the thing. “I can think of no reason why this should happen.” A pause of perhaps a second and a half. “They’re gouging us because they can.”

Note what has occurred. A man has announced that his search for causes returned nothing, and has then, without drawing breath, produced a cause. Not a tentative one. Not a hypothesis offered for inspection. A verdict, with a defendant, delivered with the serene confidence of someone who has just finished telling you he knows nothing about the matter.

You have read the professional version. The columnist does the same on a larger stage, for a fee, and with his photograph beside the text, so that the bafflement arrives pre-authorised. In his hands the sequence is practically liturgical: the outrageous number, the profession of bafflement, the villain. The reader nods. Nobody, in my experience, has ever interrupted at step three to observe that greed is a reason and the speaker has just said he could not think of one.

Call the move villain of the gaps, after the god of the gaps that theologians once stationed wherever physics had not yet arrived. Where the speaker’s causal knowledge runs out, an agent is inserted to fill the hole. The secular version swaps the deity for an underwriter. Greed of the gaps is its commonest species, and the one that concerns us here.

How does the trick work? By an equivocation so smooth it passes for grammar. “Reason” in the first sentence means justification: no excuse I am prepared to accept. “Reason” in the second means cause: the thing that made the number move. The speaker has not found no cause. He has found no cause he likes, declared the search closed, and reached for the one that was in his pocket before the envelope was opened. There is no offence in suspecting greed. The offence is promoting the suspicion to a verdict without the inconvenience of evidence, so that an ignorance which ought to have made him cautious has instead made him certain. The logicians call the hinge the argument from ignorance (Walton, 1995): I have not been shown it is so, therefore it is not so. Villain of the gaps is that argument with a face painted on the conclusion.

I can think of a hundred reasons why Derek’s premium rose, and so can you, and we both know that not one of them appears on the letter. That is our failing, and I shall come to it. It is no licence for the man with the column.

II. The Courtesy of the Steelman

In the spirit of charitable listening, let us give the procession of events a fair hearing, because the people who perform it are not fools.

The disclaimer may be perfectly sincere. Derek’s renewal shows two numbers and not a word on how one became the other; the information in front of him was assembled by our side of the counter, and it is bare. Pomerantz (1986) showed that “no reason” and “nothing has changed” are standard equipment in complaining, deployed to legitimise a grievance before an unsympathetic hearing. That is how English speakers complain, not a lie. The suspicion has a pedigree, too: Kahneman, Knetsch and Thaler (1986) found that people judge a price rise fair when they can see a cost behind it and exploitative when they cannot, and we have shown Derek no cost. And the villain is sometimes real. IMF economists (Hansen, Toscani and Zhou, 2023) put domestic profits at just under 45 per cent of the euro area’s consumption-deflator rise from early 2022 to early 2023, with no widespread rise in markups but with profits better protected than wages. Market power exists. Anyone who denies it is running the same move in reverse, with “irrational public” as the culprit.

So: sincere disclaimer, respectable heuristic, occasionally correct conclusion. What is the complaint? That none of it touches the move. A heuristic that is sometimes right is not an argument. A sincere report of ignorance is not evidence about the world. The steelman establishes that Derek is honest and that gouging exists. It does not establish that his two sentences, in that order, have told him anything whatever about his insurer.

III. What the Gap Was Full Of

You know what was in the gap. You sat through the January renewals, watched repair costs and theft payouts climb, and signed off the combined ratios that followed. I shall not rehearse the figures to the people who produced them. Two facts matter here only for what they do to the columnist’s story.

Both personal lines lose money more often than they make it. One may gouge or one may lose money — it is difficult to manage both at once. The figures acquit no individual insurer of any particular sin; a firm can misprice one postcode and still bleed overall. What they do is oblige anyone alleging profiteering across the board to explain how a trade gouged its way into the red.

And the regulator did not whisper the other one. Since 1 January 2022 a renewal price may not exceed the equivalent new-business price. The loyalty penalty, the one practice that actually matched the columnist’s story, was banned in both lines the year before Derek’s envelope arrived. If his renewal doubled, strangers are being quoted at least as much for his risk; the insurer may charge a great deal, but it may not charge Derek more for being Derek. The columnist is reviewing a play that closed.

Nor does any of it explain why Derek’s own premium doubled when the average motor premium rose by a quarter. That is in the rating file, as you know just as well as I. Neither Derek nor the columnist has the file. Only one of them is paid to ask for it.

Now the lemma, the sharpest tool in the box and the one to hand the next person who says greed to your face. Greed is roughly constant. A constant cannot, on its own, explain a change. Whatever doubled the premium is something that changed between last year and this; the insurer’s appetite for profit did not. Blaming greed for a price movement is like blaming gravity for the vase breaking today rather than yesterday. One qualification travels with it: a constant appetite can yield variable extraction if the opportunity changes, which is what the sellers’-inflation economists say happened in 2022. The lemma is a diagnostic, not an acquittal. But it puts the burden where it belongs: if you wish to say greed, show what changed about the opportunity. “I can think of no reason” is the announcement that you have not looked.

Why is the villain always to hand? Because the mind arrives pre-stocked. Bryan Caplan (2007) reports, from a 1996 survey, 74 per cent of the public blaming greedy oil companies for high petrol prices against 11 per cent of economists, and Bhattacharjee, Dana and Baron (2017) found the belief that profit is a straight subtraction from society’s welfare held right across the political spectrum. Bastiat said the rest in 1850. What is seen is the number. What is not seen is everything that made it, and we are the people who decided not to show it.

IV. Why Nobody Objects

The device survives because it is never challenged. Derek Edwards (2000), no relation, found that most extreme formulations in conversation pass untouched; the softening, “well, hardly any reason”, appears only when somebody pushes back, and in a sympathetic room nobody does. Hold that finding; it is the most useful sentence in this essay for anyone with a press office.

Derek is the audience of this theatre, not its author. He sees two numbers; the underwriter sees the database; between the two lies everything that might explain why one became the other. The renewal letter that hands him a doubled figure and no account of it has left a hole precisely the shape of a villain, and a trade that complains of being misunderstood has only itself to thank for the shape of the hole. That is on us.

The columnist is another matter, and it is for him that I have kept the heat. He is paid to look. He is, in the strict sense, baffled on a salary. He has the sources, the contacts, the column inches and our press offices at the end of every line he declines to pick up. When he writes “I can think of no reason” he is reporting the limits of his effort rather than of his knowledge, and then charging the reader for the report. The pose of bafflement is an instrument: it makes the villain feel like the last thing standing when it was the only thing he brought.

Consider what the pose requires him not to know: everything you knew by February. The January renewals. The quarterly claims releases. The regulator’s ban on the very practice he was describing. Each was a telephone call away, the first two a search away, the third in the newspapers, his own very possibly included. He made none of the calls, because the villain was ready and the deadline was not.

Observe the alchemy. A man sits down knowing nothing about why a price moved. He announces that he knows nothing. And by the end of the paragraph his knowing nothing has become the evidence: if he, with his byline and his years in the business of explaining things, can find no reason, then surely there is none, and the only candidate left standing is the one he walked in with. Ignorance has been promoted to expertise without passing through the inconvenience of learning anything. It is the one professional qualification that improves with neglect.

This is the inversion that ought to sting. The amateur who cannot think of a reason is confessing an ignorance he never undertook to cure. The professional who cannot think of a reason is advertising a service he has declined to perform. One is a man in a hallway. The other is a man at a desk, with a byline, converting his own idleness into a reader’s grievance and your reputation, for a fee. The duty to find out rises with the authority one claims. He has claimed the authority and skipped the finding out, and the space between the two is where his column lives.

Is it too much to ask a professional explainer to telephone a broker? Apparently so. The broker might have given him a reason, and a reason is the one thing the column cannot accommodate.

V. The Counsel of Proverbs

The counsel is for the man with the column, but it will serve anyone. If you cannot think of a reason, do not manufacture one. Say that you cannot think of a reason, and stop. “My premium doubled and I do not know why” is complete, accurate and far more dangerous to a bad insurer than any accusation, because it is a question that can be put in writing. “They are gouging us” is a conclusion that excuses the writer from ever asking.

The Book of Proverbs has it with admirable economy: “Even a fool, when he holdeth his peace, is counted wise.” The internet prefers a cruder version and attributes it to Lincoln or Twain, neither of whom can be shown to have said it: better to keep your mouth shut and be thought a fool than to open it and remove all doubt. The attribution is folklore. The advice is sound.

For our side of the counter, three lines, and a fourth for his:

1. Fix the letter. Two numbers and no account of the gap is an invitation to fill it with a villain. Three lines on what moved would do: claims costs, reinsurance, the rating changes that applied. The rules require the two numbers; to my knowledge nothing in them forbids the explanation.
2. Give the press office the reasons before the column runs, not the rebuttal after it.
3. When the column appears, push back, politely and with the combined ratio attached, every time. Edwards’ finding is that the extreme formulation softens only when somebody pushes. Nobody has been pushing.
4. And for the man at the desk: before typing “greed”, ring the ABI, read one broker’s renewal report and look up what the FCA banned in 2022. It takes an afternoon. It is, as it happens, the job.

The god of the gaps retreated as the gaps closed. The greed of the gaps will not, because its gaps lie not in the universe but in the columnist, and he has no intention of closing them; they are where his copy comes from. He can think of no reason. Then, within a breath and at so much a word, he can. The second sentence does not refute the first. It confesses it.