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Choice Chance Control Money Management Risk Game

Choice Chance Control Money Management Risk Game. All About Insurance. Insurance Companies are Organized Differently.

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Choice Chance Control Money Management Risk Game

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  1. Choice Chance ControlMoney Management Risk Game All About Insurance

  2. Insurance Companies are Organized Differently. • The purpose of this game is to give you a better idea about risk and how insurance companies minimize risk and maximize their profit. Insurance company structures vary in how they utilize their resources and your premiums.

  3. The Combined Risk Game • Your group is about to embark on a merchant marine adventure. • You will simulate 4 different organizational structures for insurance. • Under each organization type (1 – 4), you will be making choices based on your best knowledge of how to make money. • Each person starts with $2500 cash.

  4. Merchant Marine Adventure Game • Here are 4 different organizational types for insurance plans. • Type 1: Bottomry • Type 2: Mutual Insurance Company • Type 3: Stock Insurance Company • Type 4: Individual Underwriting.

  5. How to Play • Each organization type has a different role for you to play. • You handle the money and weigh the risk of each plan. • Each person starts with $2500 cash for all plans. • At the end of the game after you know your cargo’s fate, adjust your assets and discuss the methods of combined risk.

  6. BottomryType 1 • You can be a • Merchant and buy one or two loads of cargo at $1000 each • Merchant Borrower. You can use your own money and or borrow money from a Lender at 10% interest if you want to take more cargo. • Lender can lend $1000 to $2000 to Merchants.

  7. Bottomry Rewards • If a cargo load gets delivered…… • The Merchant receives a 50% ($500) profit for the cargo from selling it to foreign lands. • If money was borrowed, the Merchant must repay the loan to his Lenders plus 10% interest ($100) for each load of cargo insured.

  8. Bottomry Risks • If a cargo gets lost…… • The Merchant loses and money invested. • The lender must forfeit the loan for that cargo.

  9. Mutual Insurance CompanyType 2 • You can be a • Merchant and buy cargo for $1000 per load. • Insurance costs $50 a load • Insurance Money is placed inside a company “pool” • You become a Participant in the Pool • Uninsured Merchant’s take their chances at sea.

  10. Mutual Insurance Company Rewards • If a loss occurs….. • Participants who have lost cargo will get reimbursed from the insurance pool. • If losses are greater than the pool divide the pool amount by the % contributed by each member • If losses are less you can split the remainder by the % contributed

  11. Mutual Insurance Company Risks • If no loss occurs…… • Each successful Insured or Uninsured Merchant receives $500 profit per load • Participants in the insurance pool split the pot by the % contributed. • The pool represents the dividends split by a successful company.

  12. Stock Insurance Company Type 3 • There are four different roles to play • Merchant and buy cargo for $1000 per load. • Insured Merchant pays a premium of $50 per load in a company “pool.” • Uninsured Merchants take their chances • Stockholders must invest $100 per share in company. (this increases your ownership.)

  13. Stock InsuranceRewards Factors • If no loss occurs….. • Stockholders split the pool by the % they contributed to the pool • Insured merchants get no dividients • Each successful Uninsured Merchant and /or Insured Merchants receive a 50% ($500) profit from the cargo!

  14. Stock InsuranceRisk Factors • If a Loss Occurs….. • Insured merchants get reimbursed from the pool • If losses exceed the pooled funds, • Insured merchants who have lost cargo split the pool by the % they own. • Stockholders lose entire investment. • If losses are less than pooled funds then stockholder split the pool by the %. • (Insured merchants get no dividends!)

  15. Individual UnderwritingType 4 • You can be a • Merchant and buy cargo for $1000 per load. • Insurance costs %50 per load paid to an individual underwriter and become an Insured Merchant. • Individual Underwriter adds the entire amount of each premium paid to the “pool” of personal assets. • Take your chances and become an Uninsured Merchant.

  16. Individual UnderwritingRewards • If no loss occurs…. • Each successful Uninsured Merchant and/or Insured Merchant receives a 50% ($500) profit for the cargo from selling it to foreign lands. • The Individual Underwriter keeps the money in the pool as his/her own personal assets.

  17. Individual UnderwritingRisk Factors • If a loss occurs • Insured Merchants who have lost cargo will get reimbursed from the personal assets of the Individual Underwriter. • If losses exceed the amount in the pool, The individual underwriter is personally responsible for paying the damages. • If the losses are less than the pool the underwriter keeps the assets. • Uninsured merchants are not reimbursed.

  18. Check Your Understanding • Create a talking paper to discuss the advantages and disadvantages of each type of company. • Which organization contains the most risk? • Which organization is the safest investment? • Which has the most potential for making money? • Which has the least?

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