Chapter 1 1) Chapter 1 Case Application from textbook a. b. c. d. e. f. g. 2) Chapter 1 Case 2 Individuals who are in charge of handling loss exposures for corporations, municipalities, universities, etc. are called “risk managers.†Why are the identification of hazards and the preparation for perils important in risk management? What types of physical hazards confront the risk manager of our university?
Chapter
1
1) Chapter
1 Case Application from textbook
a.
b.
c.
d.
e.
f.
g.
2) Chapter
1 Case 2
Individuals
who are in charge of handling loss exposures for corporations, municipalities,
universities, etc. are called “risk managers.†Why are the identification of
hazards and the preparation for perils important in risk management? What types of physical hazards confront the
risk manager of our university?
Chapter 2
3) Chapter
2 Short Answer
What is the law of large numbers? Why is the law of large numbers
important to private insurers?
4) Chapter
2 Web Exercise – Insurance Fraud
In
this chapter, you learned the definition of insurance and the requirements for
a loss exposure to be privately insurable. You also learned about the costs and
benefits of insurance to society. While insurance provides many benefits to
insureds, the presence of an industry that has significant financial resources
often brings out the “worst†in people. Indeed, insurance fraud continues to be
a problem.
You
may believe that you are immune from the impact of insurance fraud. The cost,
however, is significant and all insureds bear a portion of the cost through
higher premiums. Fortunately, there are organizations that attempt to prevent
insurance fraud and reduce the cost of insurance fraud. One such group is the
Coalition Against Insurance Fraud. Visit their web site at:
.insurancefraud.org/”>http://www.insurancefraud.org
Use
the information provided at the site to answer the following questions about
insurance fraud.
1.
When was the Coalition founded and what is its mission? (See the “About Usâ€
link)
2.
According the site, how much does insurance fraud cost Americans each year?
(Click on the “Fraud: Why worry†link in the left margin, and then the “Impact
of Fraud†link) How does insurance fraud impact individuals and businesses?
3a.
The site lists several categories of scams. (see the “Scam alerts†link in the
left margin to learn about different types of scams) Under “Agents &
insurers,†what is meant by churning, sliding, and twisting?
3b.1.
Next access the “Staged crashes†link under “Scam Alerts.†One type of staged
auto accident is a “swoop and squat.†How does this type of staged accident
work, and why is the “swooping†car likely to have several passengers in it?
b.2.
Another type of staged accident in called a “Drive Down.†How does this type of
staged accident work?
3c.
What are the common medical scams? See the links under “Medical.â€
4.
Each year the coalition selects some of the worst cases of insurance fraud for
its “Hall of Shame.†Which cases made the list last year? See the “Hall of
Shame†link in the left margin under “Fraud: Why Worry?â€
5) Chapter
2 Short Answer
Can individuals who have a higher-than-average probability of loss be
insured without adverse selection occurring?
6) Chapter
2 Short Answer
Last night Ken and Ann Johnson’s home burned to the ground. They were not insured. Clearly this was a catastrophic loss for the
Johnsons; yet one of the characteristics of a privately insurable risk is that
losses must not be catastrophic. Explain
this apparent contradiction.
7) Chapter
2 Case 2
The
Feelings Mutual Insurance Company is considering insuring two risks the company
has not previously insured: windstorm and war.
Considering the requirements of privately insurable risks, will the
Feelings Mutual Insurance Company be able to write insurance for windstorm and
war? Explain your answer.
Chapter 3
8) Chapter
3 Case Application from textbook
a.
b.
c.
d.
e.
9) Chapter
3 Web Exercise – Captive Insurance
Funding losses when they occur is an
important concern for a risk manager. As you learned in Chapter 3, there are
several funding alternatives. These alternatives range from pure retention of
losses and paying for losses with self-funding, to purchasing insurance and
transferring the loss exposure to an insurer that will pay the losses.
Another interesting alternative discussed in
Chapter 3 is a captive insurance company. A captive insurer is an insurance
company established by a parent company for the purpose of insuring the parent
company’s loss exposures. While many captive insurers are based off-shore (e.g.
in the Cayman Islands or Bermuda), captive insurers may also be formed domestically.
As each state regulates insurance within its borders, a state wishing to
attract captives can pass favorable legislation.
Which state is the most “captive friendly�
It’s Vermont, by a wide margin. At the end of 2012, Vermont had licensed over
900 captive insurance companies. To learn more about the benefits of captive
insurers, types of captives, and why Vermont is a popular captive domicile,
visit:
.vermontcaptive.com/”>http://www.vermontcaptive.com
Use the information at this site to answer
the following questions.
1. What are the benefits of forming a captive
insurance company? (click on the “Captive Basics†link at the top of the page,
and then “Why form a Captive†on the next screen)
2a. Why is Vermont a popular domicile for
captives? (click on the “Why Vermont†link under “About Usâ€)
2b. How many Fortune 100 and Dow 30 companies
have a Vermont captive? (see the “About Us†link)
3. How has the number of Vermont captives and
the premiums written by these captives grown over time? (see “Captive
Statistics†link under “Captive Basics†to see some very interesting charts)
4a. What is the initial licensing fee for a
Vermont captive, and what does it cost to renew the license each year? (under
the “Laws & Regulations†link at the top of the page, click on “Vermont
Captive Feesâ€)
b. What is the premium tax rate for business
written by a Vermont captive insurer?
5a. How much surplus and capital are
necessary to start a pure captive, an association captive, and a risk retention
group in Vermont? (under “Laws & Regulations,†click on “Vermont Laws,†and
then click on the “Title 8 Vermont Statutes Annotated†link. See page 3 and
page 4 to answer this question and the following question.)
5b. Does the surplus and capital requirement
have to be met through cash? Explain. (see Section 6004, part (c))
10) Chapter
3 Case 2
John
is a risk manager for Universal Megatronics (UM). At UM, the Personnel Department is
responsible for employee benefits and the Risk Management Department is
concerned with property and liability exposures only. Late last year, UM added a new employee
benefit, off-site daycare, to UM employees who have children. No one bothered to tell John about this new
benefit of its location. Why was John
furious when he learned about the existence of the off-site day-care center?
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