Holistic Risk

When evaluating the capacity of consumers to take risk MMPI asks a series of teaser questions – intended to demonstrate the type of risks that respondents are likely to take with their money. Psychologists know only too well that males are prepared to undertake more risk than females (it’s difficult to reach a risk consensus for married couples, for instance) – and MMPI has evidence to show that mood swings and other circumstances do affect responses. For example, lotto winners are willing to take on bigger risks than they would have previously. A “good” Monday morning and a “bad” Monday morning also produce varying responses.

So the whole process of risk evaluation can never be taken as definitive because of a host of variables that may be at play. But there is one area where conclusive risk findings do reveal themselves – although some people will find the topic a little bit sensitive.

Risk-evaluation studies were conducted on patients with advanced lung cancer. They were each asked two very specific questions in relation to hypothetical therapies. Would they opt for a treatment that would guarantee survival for 4 years maximum; or one that offered survival of between 1 and 7 years? A full 80% of patients chose the latter option. At first glance, we might expect life and death situations to produce more radical results. But, on reflection, is it any different to opting for life cover until age 60 or insisting on insurance for whole-of-life?

The US has introduced a law with the whimsical title of the Right to Try Act. It is intended to allow terminally-ill patients to take their chances with unapproved drugs and medicines. There are some constraints – decisions are taken in consultation with a medical professional – but the intent is clear. Take on whatever level of risk you want. You have the right to try. Once again the life or death dilemma may cloud our insight but are consumers not faced with similar imponderables when choosing serious illness insurance??

Knowingly or not, we all take decisions on risk on a daily basis. Drivers, cyclists and pedestrians constantly play a game of dice. Taking to the air without travel insurance is a high-risk strategy. Creating labels for the different types of risks may help in their understanding but it causes consumer complacency. Risks are often interconnected. That doesn’t mean they’re the same. The oddly named life insurance (it’s really death assurance) and serious illness cover are often linked together. But it pays to remember that not all deaths are the result of serious illnesses – and, conversely, people do successfully recover from serious illnesses but, thereafter, may endure ongoing hardship.

Far too often consumers see risk as a financial concern. If they can’t pin financial worth on the risk they’ll tend to ignore it. This is unfortunate. Risk prevention takes many different forms and not all are worthy of financial measurement. As with most risk evaluations, the risk of least obvious concern is the one to watch!