Decision-Making Under Uncertainty: Bridging Theory and Practice
Uncertainty is a common thread throughout the show of life, affecting the destinies of families and businesses equally. As revealed in the laboratory course titled “Decision-Making Under Uncertainty: From Expected Utility Theory to Behavioral and Cognitive Approaches,” hosted by Professor Luciano Fasano at the University of Milan on November 22, insurance is emerging as a critical strategy to confront this uncertainty.
This module, organized in collaboration with the journal www.nationaldailypress.it, featured Dr. Marco Fossati from Intesa Sanpaolo Protezione (a division of Intesa Sanpaolo Assicurazioni).
He offered invaluable insights into the role of insurance in modern society.

The State of Italy’s Insurance Market
The Italian insurance market looks from one side both advanced and lagging.
Where life insurance investments have made a notable uptick, in comparison with their life insurance counterpart, other areas, and more precisely non-life insurance, are still behind the European average.
Italian households’ life insurance savings as a share of GDP align with European averages.
This indicates a better understanding of the necessity of life insurance.
The situation, however, brings up the fact that the penetration rate for non-automotive insurance still falls low. This reflects a gap in the attire of an economy that has developed in an unregulated manner.
Corporate risk management in Italy, though, has an example of mixed results.
The level of awareness and substitutive measures regarding contemporary risks, among which there are modern cyber threats, is still relatively low.
Only 19% of businesses have sought specific cyber risk coverage.
On the other hand, 23% of them—being fully aware of such products—have decided to turn a blind eye.
These numbers are more than just statistics.
They illustrate the degree of difficulty Italy faces in making the switch from the traditional risk management approaches to adaptive, up-to-date responses.
Expected utility theory follows the logic that individuals can rationally evaluate risks and rewards. However, behavioral economics and cognitive science reveal the impact that gaps in knowledge, biases, and situational constraints have on real-world decision-making.

Encouraging Progress
In the domain of total complementary pensions, Italy is experiencing ever-increasing participation from the public.
This fact underlines the growing concern raised within society about retirement security and, to some extent, represents the backbone of the welfare system.
The sectors of health and automotive insurance are tied to this positive outlook as well.
Health insurance premiums are rising steadily, and the average Italian automotive insurance premium is increasingly polarized with European standards.
These processes suggest continuous exertion of effort for improvement and further alignment with international standards in the areas of the Italian insurance market.
The Role of Artificial Intelligence
The feelings of risk are usually feelings that lead consumers to make whining insurance choices instead of being measures towards balancing the situation.
This progressive integration of technology, which includes the Internet of Things, mobile applications, big data, and artificial intelligence, is giving both innovators and early adopters a valuable competitive advantage.
It magnifies the challenges and highlights the flames of potential growth in the Italian non-life insurance sector.
New technologies such as big data and artificial intelligence (AI) leave no room for doubt.
They are powerful tools that are acknowledged for their ability to accomplish these unprecedented tasks.
These technologies help insurers make more accurate assessments of risks and apply customized pricing strategies. This decreases the consumer’s costs in deciding and, therefore, increases the efficiency of the market as a whole.
Insurance serves not only as an economic measure but as a guarantee of safety and leisure for families and businesses. As we underpinned within the course, insurance functions as an essential part of a financial strategy.
Insurance mitigates losses, stabilizes finances, and impels economic development even amid downturns.

Risk Management in China
Compared to Italy, China faces an even more diverse set of risk management challenges.
Factors such as population size, economic development stage, and cultural context significantly influence how Chinese businesses and households perceive and manage risk.
For example, cyber risk has become a pressing issue in China, with its burgeoning digital economy making it a prime target for global cyberattacks. Despite this, cyber insurance penetration remains low, mirroring a similar trend seen in Italy.
On the other hand, China’s approach to natural disaster risk management offers valuable lessons.
Frequent flooding and earthquakes have led to the development of extensive risk mitigation systems, including government-backed insurance policies and disaster relief funds.
In contrast, Italy’s earthquake insurance relies primarily on market mechanisms, resulting in more limited coverage.
Theoretical Applications
The seminar underscored the importance of behavioral and cognitive science in informing risk decision-making.
For China, applying these theories to public risk education and policy design could have profound effects. For instance, leveraging cognitive bias theories to craft more appealing insurance products or using behavioral incentives to boost corporate adoption of cyber insurance might yield significant results.
This course delved deeply into how decision-making theories can be applied to modern risk management.
By exploring the shift from expected utility theory to behavioral and cognitive approaches, it demonstrated how theory and practice intertwine in navigating complex, uncertain environments. Whether in insurance markets or other domains, understanding and managing risk will be pivotal for the development of future societies.