The Ostrich Syndrome about Disaster Preparedness
Even in the face of unprecedented blizzards, earthquakes, flooding, hurricanes, tornadoes, and other natural disasters, people tend to ignore the reality of these risks and fail to prepare appropriately, according to a panel at the 2015 Property/Casualty Insurance Joint Industry Forum.
Dr. Howard C. Kunreuther, the James G. Dinan Professor; Professor of Decision Sciences and Business and Public Policy at the Wharton School, said that most people stick their heads in the sand and pretend “it’s not going to happen to me.” Not only do they avoid planning for disasters, they rarely increase the level of CAT protection, even if they are highly vulnerable to natural disaster risk.
Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.), recently challenged a forum of agents, brokers, and insurers by asking the question “Can you change people’s behavior when they display the ‘ostrich syndrome’?”
Dr. Kunreuther responded by suggesting that agents, brokers and carriers have a responsibility to tell clients to focus on their worst-case scenario, and then ask them, “How would this disaster impact you? And how would you respond?”
Drs. Hartwig and Kunreuther admitted that agents, brokers and carriers face significant challenges when they discuss low-probability, high consequence events. Most heads of household and business owners make decisions in spur of the moment…when the disaster is looming rather than anticipating risks involving extreme events.
Dr. Kunreuther said that most consumers decide to buy CAT insurance after the event and then cancel these policies in a few years because they see that they are spending “all this money and getting nothing back.”
To get consumers to change their ‘heads-in-the-sand’ mindset, Dr. Kunreuther suggested stretching the probability timeline. For example, if your client has a 1-in-100-year chance of a flood, remind the client that this means that after 25 years in their building, they will have a greater than 1-in-5 chance of a flood.
How do you get your clients out of the “Ostrich Syndrome?”