Decisions are made in the absence of perfect information on a daily basis in all forms of commercial activity. In the insurance industry, key decisions are made in a number of different areas but include underwriting decisions, risk governance decisions, and management decisions.

A fair volume of research has already taken place in the field of decision making under uncertainty, but elements are missing or are not directly useful to insurance. Across academia, different disciplines consider uncertainty separately, with no joined up standardised framework or common language to communicate or correlate results.

Only a handful of studies have examined the relationship between investment in risk reduction and insurance purchase decisions for natural disasters, for instance, and fewer still have identified the behavioural mechanisms behind the relations between insurance and risk reduction activities.

In order to improve the impact of future research, it would be hugely helpful to deconstruct the challenge and gain an oversight of what is missing, and what areas of new work should be pursued next. There also needs to be a clearer understanding of the kind of decision makers such research should target to influence, and who the audience is in terms of decision makers in insurance – i.e. research should be undertaken with the end impact firmly in mind. Only stronger links between academia and the insurance sector can achieve this impact.

Key Research Questions

To drive forward this conversation, we have put together a series of questions that we believe can help shape the right level of research – and fundamentally deliver results. These are as follows:

• What existing work needs to be consolidated and developed further, to be more directly useful to insurance?
• How can we use the data produced by models for better decision-making?
• How can we recognise how people select good heuristics in particular areas of insurance – for instance how do different classes of business in insurance relate to one another?
• How can we combine analytical tools with an understanding of behavioural factors and biases? Key Questions for Researchers
• Can regulatory systems be developed with risk theory at their heart that react to extreme risks? What is the role of risk transfer in such a system?
• How can we incorporate an appreciation of uncertainty into the underwriting process?
• What are the behavioural mechanisms behind the relations between insurance and risk reduction activities?
• How do we explore the protection gap – deconstruct the problem, and improve the motivation to buy?

If you are an academic and believe you can help fulfil or progress the questions above, or if you are an insurer wishing to expand or share your own expertise on the topic, please get in contact with us to see how you can help.