Insurance and safety after September 11, 2001: Coming to grips with the costs and threats of terrorism
This chapter, originally written as a consequence of the terrorist attacks of September 11, 2001, provides an elementary, everyday introduction to the concepts of risk and insurance. Conceptually, risk has two dimensions: a potential loss, and the chance of that loss being realized. People can, however, transfer risk to insurance companies against the payment of so-called premiums. In practice, however, one needs accurate assessments of both losses and probabilities to judge whether premiums are appropriate. For many risks, this poses little problem (e.g., life insurance); however, it is difficult to assess risks of many other kinds of events such as acts of terrorism. It is emphasized, that through evolution and learning, people are able to handle many of the common risks that they face in life. But when people lack experience (e.g., new technologies, threats of terrorism), risk can only be assessed through imagination. Not surprisingly, insurance companies demand high prices when risks are poorly understood. In particular, the cost of insurance against possible acts of terrorism soared after September 11. How should people approach risk after the events of that day? Clearly, the world needs to protect itself from the acts of terrorists and other disturbed individuals. However, it is also important to address the root causes of such antisocial movements. It is, therefore, suggested that programs addressed at combatting ignorance, prejudice, and social inequalities may be more effective premiums for reducing the risk of terrosrtism than has been recognized to date.
When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:656. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.