On the Politics of Calculative Devices

Abstract

This article examines the politics of calculative devices in one of the most successful areas of finance, the life insurance business. By empirically tracing an insurance applicant's risk trajectory, it analyses how calculative devices perform insurance underwriting through acting on insurance risk decisions. This allows one to document what calculative devices exactly do, and to point out the political effects of what they do. First, it highlights the fact that, contrary to thinking in terms of ‘the insurance logic’, there are multiple ways of calcuting life insurance risks. Second, it underscores the crucial role of calculative devices in that process by demonstrating how they align considerations as divergent as economics and medicine to perform a life insurance market. It then demonstrates the political effects of these calculative devices by making explicit how the latter contribute to the production of inequalities in calculative power in life insurance. In this way, the article links up insights from the performativity approach in the sociology of markets with the broader question of governing economic life. Such an approach, it is argued, provides the opportunity to open up the organization of economic markets and to put classic questions of justice and power struggles in economic markets on the agenda again.

KEYWORDS:

• calculative devices
• insurance
• risk classification
• performativity
• politics
• markets
• power analysis

ACKNOWLEDGEMENTS

I am grateful to Michel Callon, Klasien Horstman, Turo-Kimmo Lehtonen, Liz Mcfall, Martha Poon and Gerard de Vries for their insightful feedback on previous drafts of this manuscript. Helpful comments also came from the participants of the ‘Economization of Uncertainty’ workshop in Helsinki and from the two anonymous reviewers. The research for this article was made possible through the Dutch Science Foundation (NWO) and the CSG Centre for Society and the Life Sciences.

Notes

1. If people trade and purchase goods in a ‘market’, then this is because a calculative space has been constructed as a socio-technical configuration or agencement. Agencements are the assemblages or arrangements – which are simultaneously human and non-human, social and technical, textual and factual – from which action springs (Callon 2007).

2. To give an indication of the spread of literature existing in the area, see, for example, the JCE theme issue on performativity, politics and economics (Cochoy et al. 2010). Other works in the social studies of markets that study, explicitly or otherwise, the politics of calculative relations are, for example, Callon et al. (2007); Mackenzie (2006); and, more recently, Fourcade's contribution where she explicitly includes the ‘then what’ question in the analysis of economic valuation (Fourcade 2011).

3. This method was first described in 1919 by a physician, Dr. Oscar Rodgers, and an actuary, Arthur Hunter (Brackenridge & Elder 1992). It relies on tools aimed at detecting medical information (e.g. lab tests, height and weight tables), which allow one to assign debits and credits to applicants and put them into statistical risk categories.

4. The study of economic markets starts with an ethnography of economic practices (Muniesa & Callon 2005). This approach seeks to cut across the distinction between ‘macro’ and ‘micro’ levels of analysis. The empirical examples addressed by this perspective are not placed in the context of a structural analysis. Rather they investigate the formation of economic realities through contingent, heterogeneous and local processes. The question of how local or global particular economic forms are is a matter for empirical investigation.

5. The first site I studied was the underwriting department of an international bank assurance company. Since this case belonged to the market leaders in Belgian insurance, I opted as a second case for a more average market player. I considered it fruitful to focus for a second case on a company with a different profile in terms of its underwriting policy and market position. Fieldwork included first of all observation of the underwriters’ activities. I started with some introductory interviews with the head of the department, the medical advisors and underwriters in order to get a first view of the process of underwriting. After a while, I moved on to observation. By following the underwriters, observing their activities and asking them about their present activities, I primarily focused on investigating what underwriters did. I also analysed the different devices used by the underwriters, like reinsurance manuals, guidelines, computer programs, and internal policy documents. I also opted to study interests and relevant connections within the company, all having some or other link with underwriting, such as the claims, actuarial and marketing departments, and the corporate management. Finally, based on in-depth interviews with key informants and written sources, an analysis has been made of the wider socio-historical configuration of underwriting by exploring insurance regulation, the specifics of the Belgian life insurance market and professional associations of insurers, medical advisors, actuaries and patient groups.

6. In sorting out these various considerations when positioning the insurance product, it is thus also possible to take into account the clients. Although they are not physically present at this stage, indirectly, clients may co-construct or ‘co-write’ the underwriting policy (via insurers’ assumptions on clients’ expectations, via statistics based on claims results from previous applicants, etc.).

7. Interview with respondent of the Belgische Vereniging van Verzekeraars (BVVO) = Belgian Association of Insurers.

8. The key task thereby is to find variables that group similar risks in such a manner that there are statistically significant loss differences (‘excess mortality’) as compared to the standard rate class.

9. As was illustrated in the previous section, companies follow different profit-making strategies. Investing and innovating in the medical statistical risk categories is thus one out of other profit-making strategies for an insurance company.

10. See for more details on the competitive advantages of having experience statistics Van Hoyweghen (2007).

11. In this way, the calculative devices deployed during the process of underwriting are performative at an institutional level (Espeland & Sauder 2007), wielding power not only over Emma but also over the underwriters, insurance experts and actuaries.

12. This argument on the effects of private insurance for inclusion in society applies all the more if we take into account the shifting role of private insurance in Western societies. Private contracts are becoming increasingly important for access to appropriate care, and private partners are increasingly involved in the provision of access to social goods. The various economic and political uncertainties, especially when combined with reductions in welfare budgets, make it more important to have some form of private insurance, providing some form of financial security for less fortunate times. Offering financial security to dependants through life insurance or other private investment plans has become increasingly important. Being able to buy this good may very well be a major symbol of full membership in current societies.

13. This focus on ‘voicy’ consumers suggests a link with the work of economist Hirschman (1970) on ‘exit, voice, and loyalty’. Although published more than 30 years ago, Hirschman's theory is inspiring because it focuses on how private or public institutions and users relate to each other and which mechanisms are available to consumers in co-performing these institutions.