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Risk Mitigation Logic For Individuals

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#1 petrushkagoogol


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Posted 26 November 2017 - 11:31 PM

Insurance companies are based on the priciple of "mortality surplus".
Consider a person with 3 risk factors in his life -
1. Chronic Cardiovascular disease - internal risk - weightage 80 percent (uncontrolled hypertension or hypotension can be fatal).
2. Alcoholism - internal risk - weightage 15 percent (too much alcohol can cause cirrhosis of the liver or other organ failure).
3. Driving a bike to work - external risk - weightage 5 percemt (need to wear a helmet).
If you deal with (1) it will be more beneficial, as (1) could lead to (3). (anxiety can affect reflexes).
Also, not dealing with (1) can lead to (2) (alcoholism can cause depression and itself be the cause of it).
So an optimum strategy would be to deal with that factor that has maximum weightage, which can reduce possibility of of other factors that have lesser weightage.
Also it is easier to deal with internal risk than external risk.
Is this practical and effective ?  :sherlock: 

Edited by petrushkagoogol, 26 November 2017 - 11:33 PM.

#2 Buffy


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Posted 27 November 2017 - 01:11 AM

Well, the issue is that it's pointlessly complicated, and fraught with issues of justifying the potential interactions. Actuaries find it much easier to simply to look at death/illness related statistics/costs (depending on whether you're talking about life or health insurance, something you didn't specify), and dump people in buckets relevant to the top traits they have. That's an approach you can justify because it's entirely based on empirical data, and it's easy to compute.


Since these traits have very wide standard deviations on the average expected result, trying to improve your "accuracy" is pointless.



If you only do the easy and useless jobs, you'll never have to worry about the important ones which are so difficult. You just won't have the time. For there's always something to do to keep you from what you really should be doing, and if it weren't for that dreadful magic staff, you'd never know how much time you were wasting, :phones: