Book Reviews
| Published date | 01 December 2005 |
| Date | 01 December 2005 |
| DOI | http://doi.org/10.1111/j.1467-6478.2005.00341.x |
Book Reviews
UNCERTAIN BUSINESS: RISK, INSURANCE AND THE LIMITS OF
KNOWLEDGE by RICHARD V. ERICSON AND AARON DOYLE
(Toronto: Toronto University Press, 2004, 335 pp., £32.00 (hbk) £20.00
(pbk))
In Uncertain Business: Risk, Insurance and the Limits of Knowledge,
Ericson and Doyle extend important work begun, with Dean Barry, in
Insurance as Governance.
1
As the title of the earlier book suggests,
Insurance as Governance described how market-based insurance organiza-
tions play a significant role in government `beyond the state'. These
organizations share some of the goals of the state (such as security and
solidarity through risk pooling) and some of the methods of the state (such as
surveillance and the mobilization of professional knowledge). They are
subject to some of the same social forces as the state (such as the changing
risk environment), and they work with the state to regulate insurance
practices as well as the individuals who are subject to those practices.
2
Insurance as Governance documented each of these claims through
detailed description and analysis of insurance practices drawn from
interviews, observation, and detailed review of insurance industry trade
literature, all filtered through the worldview of a distinguished criminologist
who has logged countless hours in the participant observation, in-depth
interviews, and other aspects of qualitative research that generous funding of
criminological research has made possible.
3
It began to subject insurance
organizations and practices to the detailed, theoretically informed and
critical analysis that the police, the courts, and other penal institutions have
long received.
That Insurance as Governance only began this research process, and that
it sometimes generalized across institutions and organizations that deserve
more finely grained, separate analysis, reflects poorly on the state of
academic knowledge regarding the insurance field, not the authors' research
project. Ericson, Doyle, and Barry conducted an important and self-
consciously preliminary study of an enormous social field, a study that will
form part of the infrastructure of future dissertations and other major
research projects in sociology and institutional economics.
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1 R.V. Ericson, A. Doule, and D. Barry, Insurance as Governance (2003).
2 id., at pp. 45±6.
3
See, for example, R.V. Ericson and K.D. Hagarty, Policing the Risk Society
(1997).
Uncertain Business returns to the same social field, this time with a more
focused goal: understanding the practical relationship between risk and
uncertainty and analysing the strategies that insurance organizations employ
to manage uncertainty in different contexts. The authors report that Frank
Knight's theoretical distinction between `risk' (probabilistic or calculable
uncertainty) and `uncertainty' (what we might call `true' uncertainty) does
correspond to real differences in the insurance field. On the whole, the
greater the certainty with which probabilities of loss can be calculated, the
more readily available insurance is against that loss. But ± and this is the key
empirical insight of Uncertain Business ± competition among insurance
organizations pushes them well beyond the boundaries of the probable or the
calculable, so that insurance remains a very uncertain business, notwith-
standing the advances in actuarial science of the last 200 years.
The clearest example of this competitive dynamic appears in the life
insurance chapter. Life insurance protects people against mortality risk,
surely among the most calculable of all the uncertainties that are subject to the
risk spreading technology of insurance. Yet, on close examination, the life
insurance industry faces uncertainty in nearly every direction. Risk selection
splinters the population into pools for which there are not good mortality data.
Life insurance product innovation spurs customers to replace existing policies
(whether on their own or encouraged by unethical agents) with new ones,
complicating insurers' ability to recover the costs of obtaining new business.
Even slight changes in the interest environment produce large and to a
surprising degree unpredictable changes in customer behaviour. And lurking
behind almost everything in the life insurance business stands the uncertain
future of the taxing authorities' favoured treatment of life insurance products.
What looks from afar to be the cool, measured application of actuarial science
to an old, steady business, appears in close up to be riddled with uncertainty.
In addition to emphasizing the importance of (non-calculable) uncertainty
in the insurance business, the authors develop a useful framework for
describing how insurance organizations manage that uncertainty in different
parts of the insurance field. The framework appears in the following table
reproduced from the book:
Uncertainty Risk Responsibility Response Ability
Life Embracing Prudence Investment
Disability Spreading Solidarity Welfare
Earthquake Absorbing Mitigation Infrastructure
Terrorism Pre-empting Precaution Vigilance
In this table, the `uncertainty' column refers to the category of uncertain
harms that the insurance institutions are addressing, the `risk' column refers
to the most notable approach to risk employed in relation to this set of harms,
the `responsibility' column refers to the conception of personal responsibility
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