Academic journal article Risk Management and Insurance Review

Personal Lines Risk Management and Insurance Simulation Game

Academic journal article Risk Management and Insurance Review

Personal Lines Risk Management and Insurance Simulation Game

Article excerpt

ABSTRACT

This article examines the use of a Personal Lines Risk Management and Insurance Simulation Game in an introductory risk management and insurance (RMI) course. Business simulations and other case study teaching methods are a way to increase student engagement in the classroom, which can translate into a greater likelihood of higher learning outcomes. Because no one knows for sure what will happen in the future, there is a fundamental trade-off that influences all RMI decisions: incur a known cost today in order to reduce risk in the future even though a loss may never materialize or refuse the immediate cost that would have reduced risk even though a future loss event might still occur. It is difficult to convince students of the consequences of such decisions because most realize that the individual likelihood of suffering an insurable loss is quite small. Students also fail to understand the complexity of making these trade-off decisions multiple times in a given period for each different loss exposure they face. A description of the purpose of the game, innovative features, Smith Family Case Study, game specifics, and objectives and grading for the game have been provided. This article can be used as a step-by-step guide to implement this simulation in RMI courses at other universities to increase student engagement and enhance student learning.

INTRODUCTION

For individuals and families, risk management and insurance (RMI) decisions play a large part in determining financial success and financial setbacks. A risk management program can reduce risk and make sure that appropriate risk control and risk financing techniques are utilized to reduce the overall cost of risk. This article summarizes the use of a personal lines risk management and insurance simulation game that provides students with the opportunity to make risk management decisions given a set of probabilistic scenarios with potential losses. Students witness how their decisions affect the overall net worth of a case study family for whom they are making these decisions. In this article, we begin by identifying the purpose of the game. This is followed by a description of the innovative features of the game, including a detailed look at each of the four game stages that take place through the lens of the Smith Family Case Study. We also discuss the transferability of the game to other academic institutions, provide feedback from students about the benefits of using the game as an instructional tool, and offer concluding remarks. The appendices include the Smith Family Case Study, a sample student paper produced for the game, and the game's objectives, rules, and grading requirements that are handed out to students at the beginning of the game.

PURPOSE OF THE GAME

Business simulations and other case study teaching methods are a tried and true way to significantly increase student engagement in the classroom, which can translate into a greater likelihood of higher learning outcomes. Many publishers provide the mainstream disciplines with various simulations; however, none exist for RMI. This is unfortunate because RMI students could benefit tremendously from such an approach given the nature of the subject.

The subject of RMI is all about the concept of risk, which by most definitions is future uncertainty or the possibility that a future outcome will be different than expected. Because no one knows for sure what will happen in the future, there is a fundamental trade-off that influences all RMI decisions: incur a known cost today in order to reduce risk in the future even though a loss may never materialize or refuse the immediate cost that would have reduced risk even though a future loss event might still occur. It is difficult to convince students of the consequences of such decisions because most realize that the individual likelihood of suffering an insurable loss is quite small. Students also fail to understand the complexity of making these trade-off decisions multiple times in a given period for each different loss exposure they face. …

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