Question 1. Nationwides decision in 2004 to pull out of Florida is a sound business decision.

It does not reveal perceptual or decision making biases. Since 1992, the year that Hurricane Andrew hit Florida, insurers across the state had been slowly pulling out of residential home coverage. (Pollick 2009) Nationwides decision only reflects Floridas overall decline in coverage. Insurers and the State have even moved to stem the hemorrhaging of coverage by creating the Florida Windstorm Underwriting Association, the Joint Underwriting Association and the Florida Hurricane Catastrophe Fund, or Cat Fund. (Pollick 2009) In 2002 the Florida State government even took the unprecedented step of creating Citizens Insurance as a state sponsored nonprofit insurer of last resort. In 2009 State Farm threaten to pull out of Florida completely until it struck a deal with the government to only drop 15% of its business and raise rates by 14.8 % for everyone else. (Harrington 2009) So Nationwides decision in light of the actions of all the other insurers and even the State government shows that this decision was indeed a business one. The question here should instead be directed to how nationwide handled the pull out. Its public image was damaged through how it handled the crisis. It needed to show compassion and care instead of greed and selfishness. By phasing out coverage over time starting with the highest risk home, Nationwide could have mitigated the negative press coverage. Nationwide completely botched a logical business decision and made it into a public relations catastrophe. Pollick, Michael. (2009) Nationwide Insurance will cancel policies. Herald Tribune. Retrieved from http://www.heraldtribune.com/article/20091008/ARTICLE/910081053 Harrington, Jeff. (2009) State Farm will stay, Florida insurance regulators say. Tampa Bay Times. Retrieved from http://www.tampabay.com/news/business/banking/state-farm-willstay-florida-insurance-regulators-say/1059230 Question 2. Confirmation Bias, Escalation Bias, Randomness Error and Anchoring Bias are the most predominate obstacles to dealing with dealing with natural disasters. Confirmation Biases are decisions made through selectively gathering facts that seek to confirm our past decisions. (Robins 2011) The American Airlines Danny Burgin expressed this bias by saying that snow storms are easier to handle because they are more predictable. This over confidence in his ability to predict past storms may hinder his ability to predict future ones. Burgin would naturally seek out weather information to support his intuition rather than make decisions based of cold hard facts. Escalation of commitment is a fear of changing a decision even when it is clear that the decision was wrong. People fail to change their course of action when they are the ones at fault for making the decision. (Robbins 2011) This is what happened to Jet Blue. Even when it was obvious that passengers should have returned to the gate it was difficult to change their internal policies. The decision to leave passengers stranded was wrong and they failed to correct it in a timely manner. To compound the problem Jet Blues founder David Neeleman failed to change their refund policy. This led to him stepping down as

CEO. Randomness Error is the belief that we can predict the outcome of completely random events. (Robbins 2011) We as human beings naturally seek to create meaning out of Randomness. We inject our beliefs, super stations and past experiences to predict future outcomes. This can be deadly when it comes to dealing with natural disasters from hurricanes to winter storms. Anchoring Bias is a tendency to fixate on initial information and fail to adequately adjust for subsequent information. Jet Blue failed to make decisions fast enough to avoid stranding customers for hours on the tarmac. Their anchoring bias kept telling them that they would be able to get their planes off the ground and didnt take into consideration the changing weather conditions. Their failure resulted in the government passing new legislation called the Passengers Bill of Rights. This leads to punishing fines for airlines that strand passengers on the tarmac. The law allowed passengers to deplane and return to the gate in the event of a three-hour or more delay. This law has eliminated nearly all the major tarmac delays for domestic and international flights. (Chen 2011) Robins, Stephen. (2011) Organizational behavior. Pearson. Chen, Kelly (2011) New 'Passenger bill of rights' limits tarmac time, reimburses lost bags. PBS Newshour. Retrieved from http://www.pbs.org/newshour/rundown/2011/04/passenger-bill-of-rights.html Question 3. In example one reward systems may have played a role in the decision making process. (Robbins 2011) Insurance companies avoid risk. Rommel may have been just following Nationwides risk reward structure when he decided to axe the 40,000 policies. In example two formal regulations dictate who makes the decisions to ground flights. (Robbins 2011) At American Airlines only 4 people are entrusted with that decisionmaking ability. In an organization with 80,000 employees, it seems random and arbitrary why there are not more people involved in that decision making process. There must be additional resources that can be brought to bear on this issue and yet American uses just 4 individuals. In example three historical precedents was a major organizational constraint. (Robbins 2011) Jet Blue was used to dealing with flight delays in a certain way, by the book. This led them to being paralyzed when new decisions needed to be made. Also the historical model of just a straight refund instead of doing something more for passengers resulted in a public relations disaster. Question 4. It is quite obvious that Rommel, Burgin and Neeleman did not factor in ethics into their decisions. Their decisions are made solely on economic financial factors. This is the bean counters way of doing business. Social responsibility had to be forced on the Insurance

industry and airline industry by the government taking action. Public outrage prodded politicians to enact new laws and regulations to right social wrongs. Floridas government put caps to prevent insurance companies from raising premiums more than 10% per year. (Pollick 2009) Congress passed the Passengers Bill of Rights to stop airline abuses ranging from tarmac delays to missing bags and getting bumped from overbooked flights. (Chen 2011)

Pollick, Michael. (2009) Nationwide Insurance will cancel policies. Herald Tribune. Retrieved from http://www.heraldtribune.com/article/20091008/ARTICLE/910081053