The article introduces a new way to calculate insurance premiums based on how people perceive and react to risks and losses. It uses a theory that looks at how individuals weigh different probabilities and outcomes when making decisions. The researchers found that people tend to overestimate the likelihood of small risks and underestimate medium to high risks. They also discovered that the way people weigh probabilities changes from being concave to convex. This new method can help insurance companies better price their contracts by taking into account how people actually think about risks and losses.