Insurance Pooling: How Insurance Companies Make Profit

In this insightful worksheet, students will explore the concept of insurance pooling by analyzing data from a fictitious auto insurance company called Insure-X. Through various calculations and data analysis, students will understand how insurance companies collect premiums, manage claims, and make profits.

Objectives:

• Understand Insurance Pooling: Students will learn how pooling premiums from many customers allows insurance companies to cover claims and manage risks.
• Data Analysis: Students will analyze data related to premiums collected, claim probabilities, and damage costs.
• Profit Calculation: Students will calculate the total premiums collected, total claim costs, and determine the profit or loss for the insurance company.

Activities:

1. Introduction to Insurance Pooling: Students will receive an overview of the concept of insurance pooling and why it is essential for managing risk.
2. Premium Calculation: Students will calculate the total premium collected by Insure-X given the number of customers and the average premium per customer.
3. Claims Analysis: Students will analyze the percentage probability of different claims (e.g., parking lot dent, side mirror damage, flood damage) and the associated costs.
4. Profit Calculation: Students will compare the total premiums collected with the total claim costs to find out the profit or loss for Insure-X.

Students will gain a solid understanding of how insurance pooling helps spread risk among many customers.

This worksheet is a classroom-ready interactive and dynamic worksheet that just needs a few clicks to assign to your classroom. The worksheet is auto-scored, teachers just need to open the real-time console and monitor the student progress.