A large proportion of people believe that in the event of losses and damages they will be at least partially covered by the state or society, according to a survey conducted by Gallup International on behalf of the Vienna Insurance Group.

The survey examined the public’s response to risk in 9 Central and Eastern European (CEE) countries. The study revealed misconceptions about the financial protection offered by the state and society.

The study focused on the following risks: critical illness, disability, housing, accident liability and internet fraud.

• About two-thirds of the population have little or no awareness of the health, workplace, housing, personal liability and cyber risks analyzed in the study.

• Seven out of ten respondents do not believe that the risks can materialize, although they believe that the possible losses/damages will be high.

• About two-thirds believe that public authorities will intervene if health or occupational risks materialize, and 60% believe they will intervene if their homes are damaged or destroyed.

“Awareness is generally considered the ability to make informed and well-considered decisions about risks. The results of the study showed that there is a significant need to increase the level of knowledge about risks in all countries that participated in the study. The majority of respondents have not yet seriously considered the main risks they face in their daily lives, despite the fact that they consider the potential financial losses to be significant,” Michael Nitsche, executive vice president of Gallup International, summarized the results of the study.

Caution prevails

The results of the study indicate that prevention is the most popular measure of protection against potential risks, with the respondents starting from the premise: “If I’m careful, it won’t happen to me.”

A third of respondents said they have insurance that covers risks related to health, disability and personal liability. On average, 45% of the population has insurance that covers risks related to housing.

From 20% to 30% of respondents have allocated funds for managing these risks and are confident that the funds are sufficient. One in five respondents took no action at all, mainly due to costs, a fatalistic approach and the fact that they avoid situations where these risks may arise.

Call for state assistance

A surprising finding of the study is that a significant proportion of respondents believe that the state or society will at least partially cover the losses and damages.

Two-thirds of respondents, for example, believe that the state authorities will intervene in the event of risks related to health and incapacity, 60% believe that the same will happen in the event of destruction or damage to the home.

About 40% believe that this also applies to losses caused by internet fraud, and almost half believe that personal liability is also covered by the government. The expectation that the state or society will bear the costs increases as the likely loss or damage increases.

About 90% of respondents would like to see losses caused by health and disability risks fully covered by society, and 80% would like the same for housing risks.

More than half of respondents believe that the same approach is needed for the costs of online fraud and personal liability.

4 types of risk

The study used socio-demographic and psychological characteristics to identify four different typologies of risk-taking behavior: cautious, indecisive, rational and anxious.

• The largest share among the population is cautious with a percentage of 33%. These people believe that they always have everything under control, suppress strong emotions and constantly avoid stressful situations. In general, they have financial knowledge, but due to their psychological profile, it is difficult or impossible for them to apply it.

• Undecided – 28% of respondents. They react compulsively when they experience strong emotions and try to control risks. Therefore, undecided people have a very high level of risk awareness, but they lack the ability to manage risks financially. Therefore, their risk management strategies are only partially effective.

• Rational make up 27% of the total number: they are calm and confident that they can solve problems on their own, and actively seek their solutions. Although they have low risk awareness and are more likely to take risks, their risk management strategies are particularly effective, among other things, because they have strong financial knowledge.

• With a percentage of 12%, panickers, those who worry easily, have the smallest share of the total. They tend to overreact, often reacting impulsively; although they have an above average level of risk awareness, their risk management strategies are not very effective.

These differences between risk reporting typologies need to be taken into account in any activity aimed at improving risk awareness. As a conclusion, seven out of ten respondents cannot effectively deal with risks due to lack of necessary knowledge and psychological barriers.

Lack of knowledge about risks is related to lack of financial knowledge

You can draw parallels between the findings related to insufficient awareness of risks and the hot topic of financial illiteracy: the study shows that 80% of 18-29-year-olds and 70% of people over 30 years old have a low or average level of financial knowledge. Thus, the study shows that there is a need for education and information in this area.

“We believe that the education system plays an important role in both areas. Schools do not provide financial knowledge and do not teach knowledge about risks. Educational institutions and financial services partners must pool their expertise in these areas and act together. The VIG Group will definitely develop initiatives to raise public awareness of risks – for us, this is a key task in the social sustainability segment,” said Hartwig Leger.