From disease to long term care to natural disasters, insurance offers hope for security in an uncertain world. But it often fails to deliver. In this podcast we explore what makes insurance markets work and what makes them fail. Our guest, Amy Finkelstein, an economics professor at MIT, and her co-authors Liran Einav and Ray Fisman in their book “Risky Business: Why Insurance Markets Fail and What to Do About It,” describe what it means to be part of a selection market–the defining feature of insurance-in which some customers are more expensive than others. They point to a great example to explain this concept. While a grocer does not care who buys broccoli, an auto insurer most definitely wants to know who is a terrible driver. The composite picture some insurers need to put together, like those selling life policies, may include an actual physical exam to determine if they want to write the policy and at what cost. In this podcast we explore a range of coverages and their vagaries including pet, dental, long-term care,health, auto and disaster insurance. If you didn’t think this topic could be made interesting, listen in. It is..and it is an important industry to help us sleep at night.
Podcast: Play in new window | Download