- Home
- Report n°3: Financial protection of critical infrastructure
Report n°3: Financial protection of critical infrastructure
Risk perception
More than once in this report we have emphasized how important it is to integrate the "perception of risk" factor into the analysis. This is an essential factor when catastrophic risks are involved. The notion of risk perception incorporates psychological and emotional components and many studies have demonstrated their prevailing impact on the mode of action of groups or individuals. Studies completed by several of the most reputable psychologists have indeed demonstrated that less familiar events, perceived as being more or less completely uncontrollable, with a large-scale damage potential, are perceived by the public as presenting the highest risk. Acts of terrorism respond to that description and are therefore more likely than others to catch the attention of both media and public.
Furthermore, very frequently, people find it very difficult to integrate effectively into their actions the plausibility factor when it is particularly weak. This therefore raises the issue of communication of these threats to the public (in the broadest meaning of the word). For this reason, it is important to gain a better understanding of how the perception of the terrorist risk influences the decisions of individuals and corporations, for example in their choice of insurance coverage.
As an illustration of the above, in the months that followed the 9/11 attacks, a very large number of corporations operating in the United States (in particular in the construction industry) were concerned that they might themselves become the direct victims of attack, but were unable to find insurance coverage at an affordable price (at the beginning of 2002, no less than 45 American States authorized insurance companies to exclude terrorism from their policies). These corporations lobbied to get the American government to associate with the private insurance sector in order to work out a commercial insurance coverage program that would be available everywhere. The TRIA law passed at the end of 2002 (see next section) brought this program into existence.
Nevertheless, three years after the attacks, and with no new attack on American territory in the meantime, only less than half of corporations had purchased insurance against terrorism. A national study published in 2003 by the American Council of Insurance Brokers and Agents, revealed that 90% of brokers who were interviewed said that their clients had not bought any anti-terrorist insurance for the simple reason that they did not believe they needed it as they were not a potential target. (CIAB, 2003). Another study in the fall of 2003, only two years after 9/11, focusing solely on New York, showed that only 36% of the firms interviewed had bought anti-terrorist insurance; 66% of those without cover gave the same reason for explaining their decision not to seek cover, i.e. that they did not see themselves as a potential target (Kaye, 2003).
Risk perception is just as important a consideration in the way the public judges that government is capable of dealing effectively with the terrorist threat.