Wild about Risk

Most people do not feel the same impulse to go out and buy insurance, or diversify their investments, as they do to buy a sofa or new clothes. They should, but they don't. Insurance, investment, and banking institutions have historically had to fight an uphill battle to get individuals, businesses, and government to pay for risk management. Their successes, while impressive, remain incomplete: people still have difficulty facing the inherent risks and uncertainties about their economic future.

This is why almost every advanced country has mandatory social security and health insurance programs. Of course, people are not really unaware of life's big risks. We simply ignore them for reasons that are rooted in human psychology.

The link between intellectual recognition of risks and the impetus to act against them is mediated by fear: we have been programmed over millions of years of evolution to take decisive action against immediate and obvious threats. If a menacing wild animal approaches, we feel fear and anxiety. Adrenaline flows, our attention is focussed, and our instinct to protect friends and family aroused.

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