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Insurable Risk Perception

In: Philosophy and Psychology

Submitted By paperwoman
Words 4018
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INSURABLE RISK PERCEPTION

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The Insurable Risk Perception Paradigm:
A Model of Risk Perception for Insurable Financial Decisions

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April 30, 2014
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I have neither given nor received any unauthorized assistance in completing this assignment.
Victoria M. Mintz

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INSURABLE RISK PERCEPTION

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Introduction and Statement of the Topic
Imagine you are going to purchase an iPhone, you make it to the register beaming with pride over your new purchase, and the cashier asks you a question: would you like to buy Apple
Care? You look at your device and immediately go to the worst place possible, for some reason you are atop a very tall building holding your new phone over a railing and smash, it is dead.
Clearly this is an exaggeration of what could possibly happen, but you concede and agree to the purchase, despite the fact that you are really only preventing a small loss.
Now, consider a very similar situation, where you are seated with a life insurance agent.
You are presented with many numbers, from how much you will have to pay, to the likelihood that the company will end up paying out. Despite clear evidence that the gain is greater than the loss, consumers often decline to purchase life insurance, even though doing so could prevent a catastrophic loss.
What is it that differentiates these two decisions? Past research would indicate many theories behind the purchasing differences in such problems, but we will first highlight the primary issues. You have not been presented with any probabilities of how likely it is that your phone will indeed come to its untimely fate, yet you decide that the price of insuring against that loss is well worth the peace of mind that it provides. Life insurance on the other hand was
carefully...

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