Far-reaching reforms of U.S. health care and flood-insurance law continue to stir controversy among voters, policy makers and other industry stakeholders. Against this backdrop, Knowledge at Wharton recently talked with two Wharton professors who are recognized experts on the complexities of the insurance industry: Howard C. Kunreuther and Mark V. Pauly, co-authors of a 2013 book titled, Insurance and Behavioral Economics: Improving Decisions in the Most Misunderstood Industry . An edited version of the conversation follows. Knowledge at Wharton: In the subtitle of Insurance and Behavioral Economics, you jointly refer to the insurance industry as ‘the most misunderstood industry.’ Broadly speaking, how and why is insurance so widely misunderstood, at least in the United States? Howard Kunreuther: I think that people view insurance as an investment rather than as a protective activity. That is one of the basic misunderstandings.…