Insurance Basics

Last updated over 7 years ago

19 Nsɛmmisa

The Basic Principles of Insurance

We need insurance because life is full of risks. Watch this video about risk, and answer the following questions.

Risk Pooling in Ancient Rome

The ideas of “risk pooling” and insurance have existed for thousands of years, even back to Ancient Rome.

Follow the directions in this activity and answer the questions.

Using this information, answer the questions below.

ANALYZE: Should I Insure This Group?

Insurance companies run their business around managing risk. In order to remain in business, an insurance company needs to ask three basic questions:

Insurance Basics

Last updated over 7 years ago

19 Nsɛmmisa

The Basic Principles of Insurance

We need insurance because life is full of risks. Watch this video about risk, and answer the following questions.

Do you know anyone who has had to use insurance (health, auto, or some other type)? If so, what happened?

What are some things in your life that might require insurance?

Risk Pooling in Ancient Rome

The ideas of “risk pooling” and insurance have existed for thousands of years, even back to Ancient Rome.

Follow the directions in this activity and answer the questions.

Using this information, answer the questions below.

How many men does the group lose per year in this scenario?

How many of those men are covered under the requirement?

In any given year, how much money do the men have to place in the fund to cover the burials and two years of lost income for their fellow warriors who will die in battle?

How much does each soldier have to put into the fund each year?

What do you think would happen to these numbers if the Legion was called to the front lines? What does this do to the risk pool?

What kind of insurance were the soldiers providing for each other?

Where do insurance companies get the money to pay for losses suffered by their customers?

Why do all people in a risk pool not pay the same amount?

How do insurance companies determine how much you should pay for your insurance coverage?

Explain the difference between an actuary, an underwriter, and an insurance agent.

ANALYZE: Should I Insure This Group?

Insurance companies run their business around managing risk. In order to remain in business, an insurance company needs to ask three basic questions:

You are an underwriter at Smart Insurance Inc., which specializes in custom insurance agreements. Groups of people come to you requesting insurance, and you must evaluate whether it would be smart for the company to provide insurance to this group of people.

Read each scenario below and evaluate the three questions from above. Whether each question is True or False, make sure to explain your answer (i.e. If there is a way to gather accurate data, what is it? And if there isn’t, why not?)

Is there a large, diverse pool of people to insure (based on age, gender, health, location, occupation, etc.)?

Is there a way to gather accurate data to determine the probability of each insured needing to collect their benefits?

Is it possible to charge/collect enough premium payments to cover losses?

Is there a large, diverse pool of people to insure (based on age, gender, health, location, occupation, etc.)?

Is there a way to gather accurate data to determine the probability of each insured needing to collect their benefits?

Is it possible to charge/collect enough premium payments to cover losses?

Play the role of an underwriter and rate the risk of different individuals based upon their background, and determine who will pay the highest premiums.