Assessing Risk
Insurance Operations
Finance
Lesson Plan
Performance Objective
Students will understand the nature of the insurance industry and will be able to analyze the risk of clients
when making insurance decisions.
Specific Objectives
 Explain the concept of risk as well as the different types of risk
 Explain recent trends in the insurance industry
 Utilize technology tools to assist in assessing risk
Terms
 Insurance‐ protection against loss by spreading the risk to a large number of people, which lessens the
cost of loss for those people
 Risk‐ chance of loss
 Speculative risk‐ usually involves investments (such as an investment that can make or lose money),
but it is risk that can result in a gain or a loss
 Pure risk‐ risk that can only result in a loss with no money to be made, such as with a natural disaster
or a random act such as an accident
 Economic risk‐ can result in a gain or a loss depending upon economic conditions that can change in a
positive or a negative way
 Personal risk‐ uncertainty that involves income or lifestyle
 Property risk‐ loss that can occur to someone’s real or personal property
 Real property‐ real estate, land, or buildings
 Personal property‐ items that can be moved, such as jewelry or furniture
 Liability risk‐ possible loss that can occur due to someone’s actions
 Underwriting‐ to make a decision based on evaluating information when measuring the risk of a client
 Actuarial science‐ applies statistical methods to determine risk
 Credit‐based insurance scores‐ numerical score based on a client’s credit history
Time
When taught as written, this lesson should take approximately three to four days to complete.
Preparation
TEKS Correlations
This lesson, as published, correlates to the following TEKS. Any changes/alterations to the activities may result
in the elimination of any or all of the TEKS listed.
Copyright © Texas Education Agency, 2013. All rights reserved.
1
130.165 (c) Knowledge and Skills
(1) The student communicates an appreciation of the insurance industry and its role in society. The
student is expected to:
(N) discuss the manner in which insurance companies generate income;
(O) explain the use of state risk pool programs; and
(P) discuss trends in the insurance industry such as hacker insurance and identity theft
insurance.
(5) The student analyzes the risk posed by potential clients in order to make insurance approval and
denial decisions. The student is expected to:
(A) explain the importance of actuarial science in the insurance industry; and
(B) discuss the nature of credit‐based insurance scores.
(6) The student uses information technology tools when underwriting an insurance policy. The student
is expected to:
(B) use the Internet to determine a potential client’s risk.
Interdisciplinary Correlations
English‐English I
 110.31(b)(1)
Reading/Vocabulary Development. Students understand new vocabulary and use it when reading and
writing.
 110.3(b)(11)
Reading/Comprehension of informational text/procedural texts. Students understand how to glean
and use information in procedural texts and documents.
Math‐Algebra I
 111.32(b)(1)(C)
Interpret and make decisions, predictions, and critical judgments from functional relationships.
Social Studies‐World Geography
 113.34(c)(20)(A)
Describe the impact of new technologies, new markets, and revised perceptions of resources.
Occupational Correlation (O*Net – www.onetonline.org/)
Job Title: Insurance Underwriter
O*Net Number: 13‐2053.00
Reported Job Titles: Personal Lines Underwriter, Automobile and Property Underwriter, Life Underwriter
Tasks



Decline excessive risks.
Evaluate possibility of losses due to catastrophe or excessive insurance.
Examine documents to determine degree of risk from such factors as applicant financial standing and
value and condition of property.
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Soft Skills: Judgment and Decision‐Making, Complex Problem Solving, Writing
Accommodations for Learning Differences
It is important that lessons accommodate the needs of every learner. These lessons may be modified to
accommodate your students with learning differences by referring to the files found on the Special
Populations page of this website.
Preparation
 Review and familiarize yourself with the terminology, website links, and lesson presentation.
 Have materials and websites ready prior to the start of the lesson.
References
 http://www.ftc.gov/os/2007/07/P044804FACTA_Report_Credit‐Based_Insurance_Scores.pdf
 www.nj.gov/dep/rpp/llrw/download/fact08.pdf
 http://www.census.gov/compendia/statab/2012/tables/12s1109.pdf
 http://www.math.binghamton.edu/arcones/exam‐mlc/sect‐11‐4.pdf
 http://www.cdc.gov/nchs/products/nvsr.htm#vol60
 http://www.census.gov/people/
 http://www.bls.gov/ooh/math/actuaries.htm
 https://onlinecourses.science.psu.edu/stat100/node/48
 https://www.healthcare.gov/
 http://www.txhealthpool.org/faq.html
 http://njaes.rutgers.edu/money/riskquiz/
 http://insurance.illinois.gov/General/IdentityTheftInsurancePrevention.asp
Instructional Aids
 Textbook or Computer Program Diagrams/Charts
 Lesson Presentation
 Instructor Computer/Projection Unit
 Online Websites
Introduction
The main purposes of this lesson are to help students understand the following concepts:
 what types of risks there will be in their lives,
 different ways they can reduce risk, and
 how they can avoid risk.
Ask students what type of risk they think is most important to them.
Ask students if they know what happens if they are in a car accident and they have a loan on their car.
Copyright © Texas Education Agency, 2013. All rights reserved.
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Outline
I.
Risk and Insurance
A. Risk‐ possibility of loss resulting from
an event
B. Insurance‐ manages risk by spreading
it out among a large group of people
who pay premiums to cover losses
C. Premiums‐ the payments that people
make to insurance companies
II.
Types of Risk
A. Economic‐ out of our control; can
affect job, savings, and income
B. Personal‐ risk to your person; due to
injury, accident, or illness
C. Property‐ risk to property (such as
your home or car) due to theft, fire,
or natural disasters
III.
Risk Strategies
A. Identify possible risks
B. Assess the potential value of a loss
due to risk
C. Reduce the risk if possible
IV.
Degrees of Risk Strategizing
A. Risk reduction‐ changing your actions
to reduce risk
B. Risk avoidance‐ avoid potentially
risky actions altogether
C. Risk transfer or shift‐ assume the risk
but obtain appropriate insurance to
be covered in the event of a loss
V.
Identifying Possible Risks
A. Examine your daily routinedriving to work or school, etc.
I.
Locate pictures in magazines or on
the Internet such as, a car accident,
a person in a cast, a building on fire,
or a burglar breaking into a car or
house. Show them to the students
one at a time, and have students (in
pairs) write down the types of
losses that can occur as a result of
those events. Have the pairs
respond and present to the class.
Ask students how shoplifting relates
to the topic of risk as it relates to
business. How does it affect all of
us?
Have students get together in
groups to create a list of expenses
that the average person may have
in a month. Have a recorder write
responses for each group on the
board and total up what the class
thinks the monthly expenses will
be.
Ask students to visualize all of the
risks they or their family could
encounter in a normal day.
(Statistics such as
http://www.census.gov/compendia
/statab/2012/tables/12s1109.pdf
help determine level of risk.)
During the 1st week of school
Vocabulary/Personal
Word Walls
Multiple Intelligences Guide
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ialist
Kinesthetic/
Logical/
Interpersonal Intrapersonal
Bodily
Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual
B. Assess your health‐ medical concerns
C. Analyze your income and expenses‐
savings, emergency fund, etc.
D. Look at your lifestyle‐ adventurous,
sports, hobbies, etc.
VI.
Risk Tolerance
A. Rutgers Risk Tolerance quiz
B. Applies toward your attitude about
finances, including insurance
VIII. Assessing Value of Risks‐ Routine
A. Do you have a large or small car
payment?
B. What is the age and condition of
your automobile(s)?
C. Would you be able to rent or replace
a car in the event of an accident?
D. Look at car valuation sites such as
Kelly Blue Book or Edmunds to
determine the value of your car
IX.
X.
Explain that you may pay premiums
for twenty years and never have a
claim. That is the chance you take
when you purchase insurance.
Assessing Value of Risks‐ Health
A. Any existing health conditions?
B. What if you became ill and had to go
to the doctor or emergency room?
C. What if you had to have surgery?
D. Research the costs of any of these
events
You can go to the following website
and check out some of the
statistics:
http://www.census.gov/compendia
/statab/2012/tables/12s1107.pdf
(statistics on auto accidents by
vehicle type).
Statistics like these contribute
toward an informed assessment of
your risk.
Generally, younger people are in
better health, so health insurance
may cost less.
Assessing Value of Risks‐ Income
and Expenses
Word Walls
Multiple Intelligences Guide
Copyright © Texas Education Agency, 2013. All rights reserved.
5
ialist
Kinesthetic/
Logical/
Interpersonal Intrapersonal
Bodily
Mathematical Musical/Rhythmic Naturalist Verbal/Linguistic Visual
A. Calculate your income and expenses
per month
B. Do you have money in savings?
C. Do you have an emergency fund to
cover three to six months of
expenses?
D. Would you be able to cut expenses
or find additional income if you lost a
job?
XI.
XII.
Assessing Value of Risks‐ Lifestyle
A. Do you have hobbies that require
expensive equipment?
B. Are you adventurous or do you play
sports?
C. What if you broke a bone doing any
activities?
D. What if your equipment was stolen?
Assessment Methods
A. Rates can be determined based upon
prior occurrence of similar events
and comparison of similar losses
B. Risk can also be shared. For example,
in the event of tornado damage in
your area—and your home is
spared—you will still share the risk
through increased insurance rates
C. Credit‐based scoring system‐ a higher
credit score could mean lower
insurance rates
D. National Vital Statistics Reports
available through the Centers for
Disease Control‐ shows data used by
actuaries in assessing premiums
If they have a job or get allowance,
have students calculate the
difference between how much
money they get and their expenses.
For example, include lunch money,
gas, movies, or cell phone
expenses. Then imagine if they
were older and lost their job.
Hobbies and sports can also be
dangerous or expensive. Discuss
the risks involved. Is there a risk of
them getting an injury playing the
sport? Is there a risk of equipment
being stolen or damaged?
Because the insurance company
does not know you or how
responsible you may be, they have
to use other measures to assess
risk. Ask students if they think that
is fair or if they should let you prove
yourself first.
Copyright © Texas Education Agency, 2013. All rights reserved.
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Multiple Intelligences Guide
Existentialist
Interpersonal Intrapersonal
Kinesthetic/
Logical/
Bodily
Mathematical Musical/Rhythmic Naturalist Verbal/Li
E. U. S. Census Bureau‐ shows statistics
on health, income, and assets (such
as car and home ownership)
XIII. Statistical Methods
A. Poisson distribution‐ measures the
number of events that occur during a
specific time period
B. Stochastic models‐ uses past
experiences to predict an estimate of
value
C. Frequency distribution‐ can be a
graphical distribution of data or a
table (for example, the number and
severity of claims in a given period)
D. Expected value concept‐ knowing
that there will be claims on policies,
insurance companies attempt to
place a value on the gains it will
make on policies in the future
Discuss occupations that are
considered risky and the types of
risks that may be encountered.
Statistical measures are the main
way actuaries can quantify, or put a
value on, risk. Some insurance
companies are using credit scores
to make risk assessment, which is
geared more toward the individual
than the statistics.
XIV. What is an actuary?
A. Actuaries use data and statistics to
assess insurance risks and determine
premiums.
B. What they do
1. determine how reliable past
experiences are as a predictor of
actual performance
2. develop statistical models
3. look for variables that may affect
actual statistics
4. consider inflation relative to
future claims
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Multiple Intelligences Guide
Existentialist
Kinesthetic/
Logical/
Interpersonal Intrapersonal
Bodily
Mathematical Musical/Rhythmic Naturalist Verbal/Li
5. attempt to establish premiums
XV.
What are state risk pools?
A. They are designed to provide
1. insurance to individuals who may
find it difficult to acquire
insurance unless it is very
expensive
2. insurance that may be difficult to
obtain because of certain pre‐
existing conditions or other
health conditions
3. insurance if other eligibility
requirements apply
B. Covers medical and prescription
expenses
XVI. New Risks in the Insurance Industry‐
(E‐risk)
A. Hacking‐ breaking into a computer
network to alter it or access
information
B. Identity theft‐ unlawfully accessing
and using someone else’s identity for
financial profit
C. Possible monetary damages
1. loss of wages
2. phone calls
3. postage
4. attorney fees
5. bank accounts
D. Damages may be partially covered
under homeowner’s insurance policy
State risk pools are designed to
help uninsured people become
insured. They are not necessarily
for those who cannot afford
insurance. There are government
programs for that group of people.
People in state risk pools may be
unable to obtain insurance for
other reasons. The risk pools are
only for health insurance, not auto,
homeowner’s, or any other kind of
insurance.
Ask students if they have made
online purchases or if they use
social media. Discuss the dangers
of putting personal information
online. Have them search (on the
Internet) for ideas to protect their
identity, online and offline. As a
class, discuss what they find out.
Multiple Intelligences Guide
Existentialist
Interpersonal Intrapersonal
Kinesthetic/
Logical/
Bodily
Mathematical Musical/Rhythmic Naturalist Verbal/Li
Copyright © Texas Education Agency, 2013. All rights reserved.
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Application
Guided Practice

In pairs, have students come up with a list of at least 10 risks they would encounter in a normal day.
Give them about five to seven minutes. Tell them the risks can be about anything. The risk can include
anything from not doing well on a test that day to embarrassing yourself by dropping a tray at lunch.
Ask for a volunteer to record the responses on the board or document camera. As responses are
repeated, tally the number of responses for each risk. Next, circle each risk that the students are in
control of and can avoid. Then, ask students how they can handle the risks that are circled. Now you
can begin a discussion regarding whether people will avoid a risk, assume the risk, reduce the risk, or
find other ways to deal with risk.
Independent Practice

Have students individually conduct Internet research and select an occupation that is considered risky.
They should create a document stating the profession and list all of the potential risks of the job (and
how those risks can be reduced and avoided). A student should tally the results of the selected
occupations on the board so other students can see which ones are the most risky. Students should
present their ideas as they are being recorded on the board.
Summary
Review
Question #1:
Answer #1:
What is risk?
Risk is the possibility of loss.
Question #2:
Answer #2:
What is risk avoidance?
Risk avoidance means avoiding, or not doing, the activity that creates the risk.
Question #3:
Answer #3:
Which type of risk can affect whether or not you have a job?
Economic risk can put a job in jeopardy—depending upon the company.
Question #4:
Answer #4:
What does it mean to transfer risk?
Transferring risk means that you let someone else (such as an insurance company) assume the
risk for you.
Question #5:
Answer #5:
What should be the first step in risk strategizing?
Risks should first be identified.
Evaluation
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Informal Assessment
Any and all of the following can be used as informal assessments.
 Search online for insurance companies that have simulation games that students can play to see the
effects of purchasing insurance (as opposed to the consequences of not purchasing insurance).
Formal Assessment
The following can be considered a formal evaluation :
 Risk Identification Document Assignment #1
Students are to create a document of their choice that will focus on at least three different risks that
they either encounter now or will in the future. They will not only identify the risk, but assess their risk
tolerance and explain their risk strategy for reducing the risk (at least two strategies for each identified
risk). This document should show creativity.

Actuary Career Research Assignment #2
Students will conduct research on careers related to Actuarial Science. A good resource is bls.gov. Click
on Publications then on Occupational Outlook Handbook. They will create a two‐column table of the
data. The left column will have headings similar to earnings, education and training, what they do, job
outlook, and related jobs. The right column will contain the details explaining the topics on the left.
Other information may also be included.

Student Survey Assignment #3
Students are to create a survey to give to students and parents. This survey should include at least 10
questions of the students’ choosing. Questions can include topics such as: do they drive, have they had
any tickets/how many, have they been in any car accidents, have they broken bones playing sports or
doing hobbies, have they had any illnesses like the flu, and any other questions they would like to ask.
They need to record the ages and gender for each person who participates. The students will then tally
the results of their findings for each age group. It is okay if they only have the age group of high school
students. They will report their findings on a poster or flipchart paper. They can also use charts or
graphs to record their responses. The survey results should be easy to understand and creative in
appearance. Then students should also include a risk assessment based on their survey findings. For
example, if there are people who participate in risky sports or if there are people who have had
speeding tickets or accidents.
Enrichment
Extension
Students will interview either an actuary (if they can locate one) or a local insurance agent. They should ask
questions regarding how they assess the risk of their clients and how they determine rates of their insurance.
Do they use the Internet to determine risk level? Do they use credit scores? They will report their findings in
the form of a one‐page report.
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10
Risk Assessment
Insurance Operations
Risk Identification Document Assignment #1
Student Name:
CATEGORY
________________________________________
20
15
8
1
Required
Elements
The document
includes all
required
elements as well
as additional
information.
All required
elements are
included in the
document.
All but one of
the required
elements is
included in the
document.
Several required
elements were
missing.
Graphics‐
Relevance
All graphics are
related to the
topic and make it
easier to
understand.
All graphics are All graphics
related to the
relate to the
topic and most topic.
make it easier to
understand.
Graphics do not
relate to the
topic.
Attractiveness
The document is
exceptionally
attractive in
terms of design,
layout, and
neatness.
The document is
attractive in
terms of design,
layout, and
neatness.
The document is
acceptably
attractive though
it may be a bit
messy.
The document is
distractingly
messy or very
poorly designed.
It is not
attractive.
Mechanics
Capitalization
and punctuation
are correct
throughout the
document.
There is one
error in
capitalization or
punctuation.
There are two
errors in
capitalization or
punctuation.
There are more
than two errors
in capitalization
or punctuation.
Knowledge
Gained
Student clearly
understands the
process of
identifying risk
and how to
handle it.
Student
somewhat
understands the
process of
identifying risk
and how to
handle it.
Student is
Student has no
unclear about
understanding of
what constitutes the assignment.
risks.
Maximum Points Possible: 100
Student Points: __________
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11
Risk Assessment
Insurance Operations
Actuary Career Research Assignment #2
Student Name:
CATEGORY
________________________________________
20
15
8
1
Attractiveness
The table is
exceptionally
attractive in
terms of design,
layout, and
neatness.
The table is
attractive in
terms of design,
layout, and
neatness.
The table is
acceptably
attractive though
it may be a bit
messy.
The table is
distractingly
messy or very
poorly designed.
It is not
attractive.
Mechanics
Capitalization
and punctuation
are correct
throughout the
table.
There is one
error in
capitalization or
punctuation.
There are two
errors in
capitalization or
punctuation.
There are more
than two errors
in capitalization
or punctuation.
Required
Elements
The table
includes all
required
elements as well
as additional
information.
All required
elements are
included in the
table.
All but one of the Several required
required
elements were
elements is
missing.
included in the
table.
Content‐
Accuracy
At least five
accurate facts
are displayed on
the table.
Four accurate
facts are
displayed on the
table.
Two to three
accurate facts
are displayed on
the table.
Knowledge
Gained
Student
thoroughly
understands how
to research
careers.
Student
adequately
understands how
to research
careers.
Student
Student did not
understands
do any research
little about how into careers.
to research
careers on the
Internet.
Less than two
accurate facts
are displayed on
the table.
Maximum Points Possible: 100
Student Points: __________
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12
Risk Assessment
Insurance Operations
Student Survey Assignment #3
Student Name:
CATEGORY
________________________________________
20
15
8
1
Attractiveness
The poster is
exceptionally
attractive in
terms of design,
layout, and
neatness.
The poster is
attractive in
terms of design,
layout, and
neatness.
The poster is
acceptably
attractive though
it may be a bit
messy.
The poster is
distractingly
messy or very
poorly designed.
It is not
attractive.
Content‐
Accuracy
At least 10
questions and
results are
displayed on the
poster.
Eight to nine
questions and
results are
displayed on the
poster.
Five to seven
questions and
results are
displayed on the
poster.
Less than five
questions and
results are
displayed on the
poster.
Mechanics
Capitalization
and punctuation
are correct
throughout the
poster.
There is one
error in
capitalization or
punctuation.
There are two
errors in
capitalization or
punctuation.
There are more
than two errors
in capitalization
or punctuation.
Topic
Survey questions
are very much
related to the
topic of risk.
One to two
Three to four
More than four
survey questions questions are
questions are
are slightly off
slightly off topic. unrelated to the
topic.
topic of risk or
are missing.
Risk Assessment Complete and
thorough risk
assessment
included on the
poster.
A brief risk
assessment is
included on the
poster.
A vague risk
assessment is
included on the
poster.
No risk
assessment is
included on the
poster.
Maximum Points Possible: 100
Student Points: __________
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13