Dec 11
5
Research findings shed light on risk-taking decisions
Research into how the human brain makes risk-taking decisions and how quickly it can learn the correlations between risk and reward has won the 2011 Lloyd’s Science of Risk Prize.
A team led by Klaus Wunderlich of University College London used the latest brain-scanning technology to triumph over more than 60 other entrants to take the top prize.
The research suggests that the human brain has developed a better mechanism for learning from continuous observation than from studying statistics or charts.
The findings, which could be used to promote better decision-making strategies, are of particular relevance for the insurance industry where they could lead to a better understanding of how underwriters interpret risks and make financial decisions.
“This research suggests that human brains learn correlations between events through continuous outcome observations,” a Lloyd’s spokesperson told Thompson’s.
“The findings from this research may help to promote more effective decision-making strategies in financial situations where decision makers are encouraged to observe information sequentially rather than in the form of tables and charts.
“This could certainly have implications for the insurance industry.”
In the insurance operations category, Andreas Tsanakas of Cass Business School, part of City University London analyzed the various capital allocation exercises used to invest risk capital and offers a unifying framework and business-driven interpretation to link risk appetite and decision-making.
“Yet again, the entrants into the Science of Risk prize have provided fascinating and thought provoking insights to a range of issues of importance to the insurance industry,”
Lloyd’s ceo Richard Ward said. “The record catastrophe losses facing the industry this year are a reminder of the importance of understanding risk, be it an earthquake, climate change or cyber crime.”
He said that by working in partnership with the academic world, insurers can encourage and shape valuable scientific research to help businesses better identify and manage risk.
Courtesy of the staff at Thompson’s World Insurance News
