FIN 381

RISK MANAGEMENT AND INSURANCE

Spring2003

Prof. Arthur Gudikunst

Faculty Suite GOffice Hours:Tues and Thurs, 2:00-4:00 pm

Campus Telephone232-6387other times by appointment

Email:agudikun@bryant.edu

Website:web.bryant.edu/~agudikun

Course Description and Objectives:

Risks are confronted by both business firms and individuals on a day-to-day basis. These risks can be classified into: 1) pure risks, where there exists the possibility of either a loss occurring or no loss; and 2) speculative risks, where there can be the possibility of both loss and gain. The major focus of this course will deal with pure risks confronting businesses and individuals.

However, identifying a risk is only the first step in the process of risk management and control. When a risk is identified, the next step is to determine how to properly deal with that risk. The alternatives are numerous. We could decide to accept the financial consequences of the risk. We could decide to pool risks with others facing the same exposure. We could seek to purchase an insurance contract, which would compensate us if the risk outcome is a loss. In this case, we are paying a monetary premium to someone else to assume the risk of loss. But of course, the premium paid for someone else to assume the risk of loss must be priced appropriately, and the ability of that party to make the payments must be assessed. The other alternative may be to find ways to reduce or eliminate the risk exposure through direct action, although this may not always be possible.

The process of obtaining insurance from another party to accept our risk is only one method of dealing with the loss potential. If this alternative is available, then we need to understand how the risk is measured, how an appropriate premium payment is determined, and how a company offering to insure the risks faced by others must operate. The business of insurance, its operations, structure and legal environment is an integral part of the course.

The course will be approximately divided into three parts. The first part provides the basic framework for understanding risk, risk management, and the insurance device (including insurance providers, governmental regulation, and the financial aspects of insurance company operations). The second part will focus on life and health insurance, from both a business and individual basis. The third part will deal with property and liability risks, and the insurance products available to address these risks.

This course is a broad-based survey of risk and insurance for business and individuals.

Format for the Course:

Class meetings will comprise lectures and student-faculty discussions. Grading will be based on quizzes, examinations, case studies and other assignments from instructor.

Grading will be determined as follows:

Mid-term exams and quizzes40%

Final Exam 20%

Cases and assignments40%

Instructor Policies:

1. NO MAKE-UP EXAMS or QUIZZES- exams and quizzes not taken in scheduled period will have the weight of missing work shifted to remaining graded assignments

2. LATE HOMEWORK ASSIGNMENTS- one letter grade deduction for each day after scheduled submission (actual days, not class meeting days)

3. PLAGEURIZED OR COPIED WORK- instructor reserves the right to award a grade of ZERO to any such submitted material, including examinations.

Required text:

Principles of Risk Management and Insurance, 8th edition, by George Rejda

2003, Addison Wesley Longman

other assigned readings as directed by instructor.

Course Outline:


 
Date
(Week of)
Assigned Topic and Readings
Assignments/Study
Jan 21
Risk Concepts and the Insurance Device
Reading: text Chap. 1 and 2
Assign #1-individual insurance survey
Ch 1, Case 1, AQ(3,4)
Ch 2, AQ(1,3,4)
Jan 28
Nature of Risks and Risk Management
Reading: text Chap. 3 and 4
Ch 3, Case 2, AQ(2)
Ch 4, Case 2
Feb 4
Fundamental Legal Principles and
Insurance Contracts
Reading : text Chap. 5 and 6NOTES
Ch 5, Case 1, AQ(1,2)
Ch 6, Case 1
Feb 11
The Private Insurance Industry and its 
Operations
Reading: text Chap 25 and 26


      NOTES

Article Review #1
Ch 25, AQ(1,2,3)
Ch 26, AQ(4), Case 1
Feb 18
Insurance Company Financial Structure and
Financial Statements
Reading: text Chap. 27 and 28 NOTES
Asgn#2- Fin. Statement
Analysis
Ch 28, Case 1, AQ(3)
Feb 25
*** EXAM 1 ***
Liability Risk Principles
Reading : text Chap 7 NOTES
Ch 7, Case 1, AQ(1,2,3)
Mar 4
Homeowners and other Property Insurance
Reading:Chap 8 and 9NOTES8
Ch 8, Case 1, AQ(1,4)
Ch 9, AQ(1,2)
Mar 11
*** Spring break ***no classes
Mar 18
Automobile Insurance and Personal Auto Policies
Reading: text Chap. 10 and 11
NOTESauto
Ch 10, Case 1, AQ(1,4)
Ch 11, Case 1, AQ(3,4)
Mar 25
The Actuarial Basis of Life Insurance and Forms of Basic Life Insurance Products
Reading: text Chap 16, 17 and 18
Article Review #2
Ch 16, Case 1
Ch 17, Case 1, AQ(3,4)
Ch 18, AQ(3,4)
Apr 1
***EXAM 2 ***
Retirement, Annuities and Pension Plans: Forms and Risks
Reading: text Chap 20 and 23
Ch 20, Case 1, AQ(3,4)
Apr 8
Retirement, Annuities and Pension Plans: Forms and Risks
Reading: text Chap 20 and 23
Asgn#3- Personal Fin.
Planning case
Ch 23, Case 1, AQ(1,2)
Apr 15
Health Insurance: Disability, Income Protection and Payment for Medical Expenses
Reading: text Chap 21,22medinsNOTES
Ch 21, Case 1
Ch 22, Case 1
Apr 22
Social Insurance Programs
Reading: text Chap 24
Ch 24, Case 1, AQ(1,4)
Apr 29
Liability and Property Insurance for Commercial Businesses
Reading: text Chap 13 and 14
Ch 13, AQ(1,2)
May 8,9
***FINAL EXAM***10:00 am