FIN 381

RISK MANAGEMENT AND INSURANCE

Fall2001

Monday 6:30pm, Room M44

Prof. Arthur Gudikunst

Faculty Suite G Office Hours: Monday 3:00 pm- 6:00 pm
                                    other times by appointment

Campus Telephone232-6387Wednesday 3:00-6:00 pm
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, 7th edition, by George Rejda

2001, Addison Wesley Longman

other assigned readings as directed by instructor.

Course Outline:

DateAssigned Topic and ReadingsAssignment


 
Sep 10
Risk Concepts and the Insurance Device
Reading: text Chap. 1 and 2
Assign #1-individual insurance survey
Sep 17
Nature of Risks and Management, Providers of
Insurance Products
Reading: text Chap. 3 and 25
Sep 24
The Private Insurance Industry and its
Operations
Reading: text Chap 26 and 27
Article Review #1lecture slides ch26
Oct 1
Insurance Company Financial Structure and
Financial Statements
Reading: text Chap. 27 and 28 
Oct 8
Principles of Life and Health Risks, and Social Insurance Programs
Reading: text Chap 24
Oct 15
*** EXAM 1 ***
The Actuarial Basis of Life Insurance and Forms of Basic Life Insurance Products
Reading: text Chap 27, 16, and 17
Oct 22
Retirement, Annuities and Pension Plans: Forms and Risks
Reading: text Chap 20 and 23
Oct 29
Health Insurance: Disability, Income Protection and Payment for Medical Expenses
Reading: text Chap 21 and 22
Nov 5
Liability Risk Principles and Homeowners and other Property Insurance
Reading : text Chap 7 and 8
Article Review #2lecture slides-liab.
Nov 12
***EXAM 2 ***
Homeowners and other Property and Liability Insurance
Reading: text Chap 9 and 12
Nov 19 and 26
Automobile Insurance and Personal Auto Policies
Reading: text Chap. 10 and 11
Dec 3
Liability and Property Insurance for Commercial Businesses
Reading: text Chap 13 and 14
Dec 10
Surety Bonds and Credit Insurance
Reading: text Chap 15
Dec 17
****FINAL EXAM ****