At a dinner last week, a well-known financial journalist gave a talk. His theme, more or less, was “The things the financial services industry does that really get on the tits of my readers.”
As you can imagine, it was a longish talk. We listened attentively, until, towards the end, his 17th or 19th or 27th point was about travel insurance. His older readers, he told us, were upset about the cost, which could be very high indeed – often so high that it effectively left them unable to travel abroad.
At this point, one of us listeners could remain silent no longer. “For goodness sake,” he expostulated. “It costs them more for the simple and obvious reason that they’re worse risks. What do they expect? That’s how insurance works!”
Of course he was right (or at least mostly right – isn’t insurance at least partly to do with pooling risk so it’s affordable for everyone?). But all the same, he’d missed the point. The point of the talk was to bring home to us the real, human, often very emotional consequences of the decisions we make on perfectly robust but rational and not very human criteria. What the journalist was trying to get across was how miserable it is to be, say, 70 and effectively unable to risk travelling abroad because you had a heart attack or breast cancer 20 years ago.
Actuarily, my interrupting friend was 100% right to do so. But at another and much more important level, he was 100% wrong.