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36 | The South African Insurance Industry Survey 2016

Is the South African Industry targeting Another good way to illustrate this Most people reply quickly that Steve is
the correct countries for expansion statistical inaccuracy is with the more likely to be a librarian than a farmer.
in Africa? Refer to the 2015 KPMG following example: This is surely because Steve resembles
insurance survey article titled Insurance a librarian more than a farmer, and
in Africa by Abou Malima for targeted An individual has been described by a associative memory quickly creates a
countries and draw your own conclusion. neighbour as follows: “Steve is very shy and picture of Steve in our minds that is very
withdrawn, invariably helpful but with very librarian-like. What we do not think of in
Behavioural economics and little interest in people or in the world of answering the question is that there are
the insurance industry reality. A meek and tidy soul, he has a need five times as many farmers as librarians
for order and structure, and a passion for in the United States (and the ratio is even
Irrationality and its impact on detail.” higher in Africa), and that the ratio of male
insurance farmers to male librarians is even higher
In his book, Thinking fast and Slow, What is his most likely profession? (this certainly did not occur to me when I
New York Times bestseller and Nobel first read the question, and does not even
Memorial Prize in Economic Sciences a) Steve is a farmer occur to me now as I reread it, unless
winner, Daniel Kahneman, explains I force myself to remember). The base
that the intuitive mind is not always rates simply do not come to mind and
statistically accurate. For insurance thus prevent an accurate computation and
purposes, it is important to draw the answer, namely that Steve is more likely
distinction between the reality of the risk to be a farmer. 7
and the perception of the risk.
7 Source: (Thinking fast and slow- Daniel Kahneman)
b) Steve is a librarian

Our intuitive mind is statistically
inaccurate. How does this impact
our decision-making when it comes
to insurance?