{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Insurance law notes - 8/22 Class about Contract law of...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
8/22 Class about:  o Contract law of insurance o public policy of insurance What insurance policy is supposed to do and how it does it? Grade based on in-class open book final o Only prepared by you, your notes Insurance about: o Risk-transfer o Provides security to reduce risk o Enables productive investments o Protective mechanism for consumers History of insurance o People are risk-averse- spread risk of hazards o Lloyd's-  shipowners would meet in coffeehouse-  describe risks of voyage Underwriters would sign to assume risk for sums of money o Great fire of london-  fire insurance became available o In US, Charleston, SC first place you could buy fire insurance o Ben Franklin helped popularize and make standard fire insurance in this country Would inspect building before insuring them Insurance industry today o Insurance brokers- work together to help place  o Insurance agents - work in much smaller environments o Corporate risk managers- work w/ brokers to assess risk o Insurance co's have own underwriters to determine what pricing o Claims personnel - determine what should be covered and how much to pay.   o Insurance co's also insure their own liabilities-  reinsurers Eg. If $1 mil risk, insurer pays $200k, reinsure pays $800k o Reinsurers are also covered further- retrocessionaires Spreads the risk even further- policies diluted  Globalization in a very important financial way What economic and public policy goals exist in every situation? o Diluting risk so that companies can stay in business o What types of risk should be in insured o Misconduct in insurance claims o Rules regarding interpreting contracts o Things that Congress say can't be done Nature and function of insurance
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
How insurance works Function of insurance is to protect the policyholder in the event of future loss.    3 separate insurance functions Risk transfer  from comparatively risk-averse to less risk-averse or risk- neutral parties Risk-neutral- only concerned about expected value of risk-  probability of a loss multiplied by its magnitude if it occurs   Risk-averse- prefers large risk of suffering small loss to a  smaller risk of suffering large loss Risk-pooling  or diversification-  by insuring large number of insured  posing homogenous and independent risks, an insurer can reduce the amount of  variance in its expected losses to a very small range Insurer uses law of averages to figure how much risk costs  and pool those risks and determine how much to charge for that risk 3. Risk Allocation -  insurers attempt to set price for coverage that is 
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern