Business Finance 640
Insurance and Risk
Winter Quarter, 2008
Mondays and Wednesdays, 7:30 – 9:18 pm
Principles of Risk Management and Insurance
Tenth Edition, by George E. Rejda
2007 Pearson Addison Wesley
This course examines the principles of risk, insurance and the risk management process.
assumption of the course is that risks can only be managed if they are identified and treated prior to the
Insurance is an important tool, but not the only tool, available for that purpose.
The course begins with a discussion of risk and its meaning.
The key terms used to differentiate among
various kinds of risk are discussed.
A framework is developed for identifying, analyzing and managing
all types of risk.
The evolving concept of enterprise risk management is introduced.
The distinction between pure risk and other types of risk is clarified.
Insurance is introduced as one of
the options available to manage pure risk.
Other options for treating pure risk are also reviewed,
including loss control, risk retention and non-insurance risk transfer.
A decision framework for
selecting among these various tools is established.
Discussion shifts to the fundamental legal principles on which insurance contracts are based.
principles of indemnity, insurable interest, subrogation and utmost good faith are reviewed, as well as
the legal concepts of representation, concealment and warranty.
The basic requirements for a valid
insurance contract are discussed.
The law of agency is also reviewed, with a discussion of its impact on
the actions and duties of insurance agents.
The basic parts of an insurance policy are next discussed, including the declarations, definitions,
insuring agreement, exclusions, conditions and miscellaneous provisions.
The meaning of an “insured”
is also reviewed as are endorsements, deductibles, coinsurance and other-insurance provisions.
The focus shifts to specific insurance contracts.
Life insurance is introduced first.
includes a review of life insurance coverage types, life insurance contractual provisions, taxation of life
insurance and the method for calculating life insurance premiums.
Next, the personal auto contract is reviewed.
Liability coverage, medical payments coverage, uninsured
motorists coverage and coverage for damage to your auto are all considered.
The auto discussion
concludes with a review of the various approaches for compensating the victims of auto accidents,
including financial responsibility laws, compulsory insurance and no-fault auto insurance.
The next several classes are devoted to further study of the life and health arena.