Tuesday, April 8, 2008

math in real life

I am very tired to be writing this, so I don't know if it will work.

I recently taught a quick unit on probability for my Math 9 class. At one point I was explaining that Probability and its evil twin Statistics are very important to the industry of insurance. While I generally regard insurance with a bitter resentment worthy of tax-forms, customs officers, and the guy who broke into my truck to take the radio, my students are all ears when it comes to 'real life' topics. They were actually asking questions about insurance.

I was able to explain that insurance is placing a bet that you will die, or that your house will burn down or that your car will explode. The insurance company smiles and says no, we don't think you'll die. We bet you will live. And of course the odds and rates are all different if the probability changes, like if you are old and have seven kinds of cancer and enemies in the mafia. You answer a bunch of questions about how many cigarettes you smoke and how many ailing relatives you have and how often you go spelunking in volcanoes. I imagine that at some point in the analysis, a person at a computer looks at a number with a bunch of decimal digits that measure your life expectancy to the nearest minute. Of course they don't tell you what it is or you would breathe a raspy sigh of relief and schedule an extra trip down the volcano.

In one sense, it is utterly fascinating that insurance, a product with such an absurd premise, can take root and even stabilize an economy. The presence of insurance in a society gives almost everyone a substantial financial motive to burn down their own house, crash their car, or kill themselves. That is twisted.

1 comment:

  1. I work for an insurance company and the betting analogy is the best I've run across.

    And ... you're right that is a STRONG motivation to burn down your house. Most people aren't smart enough to pull it off though, and they know that.