With a name like mine, I have a tendency to research obscure and unscientific informational sources. Our friends and families living from Jupiter through Boca Raton should breathe a sigh of relief because Susan Hansen, a psychic, has indicated that Florida’s Treasure Coast will be spared from serious hurricane strikes in 2009. Unfortunately, she is not so optimistic for the West Coast of Florida, Louisiana and Texas.

Her news interview regarding natural disasters went as follows:

"Q. What does the 2009 hurricane season look?

A. It’s going to be good. Tiny seven to eight hurricanes will be passing through Florida, but nothing serious hitting the Treasure Coast. But I do feel Texas, Louisiana, New Orleans and the west coast of Florida will be getting hit.

Q. Will there be a storm that causes a lot of water damage hit the Treasure Coast, like Tropical Storm Fay?

A. I don’t see that happening. But one of the things I saw is actually fires. We need to conserve our water supply. I see five fires. One has to do with negligence, but I have a feeling it has to do with the drought."

Many may dismiss Ms. Hansen’s predictions. Could she be any worse than the more traditional and scientific hurricane soothsayers? Bill Gray of Colorado State University achieved some notoriety for hurricane prediction. His hurricane guesses were based on computer models, historical storms, and data on global sea-surface temperatures, atmospheric conditions and other factors. In recent years, his methods have been adopted and adapted by NOAA’s National Hurricane Center, which makes its own long-term forecasts. All of those models had some revisions after the 2006 and 2007 hurricane seasons proved them wildly inaccurate.
The property insurance business has some similarities to gambling. Insurers are like casinos, they want the odds in their favor so that over the long term and in the law of large numbers, they make money on the bets they accept. They want a sure thing, which seems a little strange since insurance companies are in the risk business.

Unlike craps, blackjack, and various slot machine games of chance where the casino odds are known, property insurers have a far different landscape. The chances of winning are virtually the same for all casinos, and definitely in the casino’s favor. Most of the time, property insurers have competitors offering consumers different products with different rates. The models insurers use to determine probabilities of loss are not the same and not mathematically guaranteed. While predicted insurance profit margins (the odds) may be much higher than the "house edge" in most gambling games, the risk of ruin from a large scale catastrophe, such as a hurricane, are usually much greater than the risk taken by a casino. It is no surprise that the Seminole Indian Tribe selected gambling rather than insurance as a wiser use of its investment dollars.

In the short term, the chances of Susan Hansen’s predictions being right are probably no better than the expensive models which try to guess the probabilities of the number and track of hurricanes in the next five years. As I pointed out in a recent blog, even insurance company hurricane predictors admit their models have not proven reliable. Maybe the underwriters of property insurers should call Susan Hansen, and save a lot of money otherwise spent on those short term forecasts.