This talk highlights factors that lead individuals not to protect themselves against low-probability high-consequence events until it is too late. How can risk assessment and risk perception be useful inputs for developing implementable risk management strategies to reduce future losses? To highlight the role that the public and private sectors can play in addressing this challenge, I will focus on the earthquake and wildfire hazards that property owners face in California and other parts of the country. The errors that individuals exhibit in deciding not to purchase insurance or invest in loss reduction measures prior to a disaster can be traced to the effects of six decision biases: myopia, amnesia, optimism, inertia, simplification and herding. A behavioral risk audit can incentivize property owners in hazard-prone areas to take steps now to reduce their future disaster losses.
Background Paper:, “Improving the National Flood Insurance Program,” Behavioral Public Policy (2018)
Howard Kunreuther is James G. Dinan Professor Emeritus of Decision Sciences and Public Policy, and Co-Director of the Wharton Risk Management and Decision Processes Center at the Wharton School, University of Pennsylvania. Howard has a long-standing interest in ways that society can better manage low-probability, high-consequence events related to technological and natural hazards. He is a fellow of the American Association for the Advancement of Science (AAAS), a distinguished fellow of the Society for Risk Analysis, and recipient of the 2015 Shin Research Excellence Award from the Geneva Association and International Insurance Society (IIS) in recognition of his outstanding work on the role of public-private partnerships in mitigating and managing risks.