Why do people buy insurance?

Will discuss this question assuming that the consumer pays his/her own premium not subsidized by anyone else. This question becomes more important and curious after we introduce the concept of "pure premium." What are the factors determining the demand for insurance? Are people buying the appropriate type and amount of health insurance? What are the reasons for over- and under-insurance?

Objectives:
Global demographic changes and calamities such as the Asian Tsunami, the swine flu, Hurricanes Katrina and Rita, and the avian flu, have forced domestic and international insurance companies to focus not only on what products they offer but also how to improve their asset and liability management, along with their financial risk management processes and systems. Increasingly, insurance companies have become very active in utilizing a wide range of OTC and exchange traded derivatives to hedge their market and credit risks. The last few years have seen resurgence in the issuance of insurance-linked instruments, such as property catastrophe bonds, securities funding life insurance reserves, insurance risk swaps, and Industry Loss Warranties (ILWs). Insurance company risk managers and financial professionals focusing on the insurance sector would learn the process by which insurance companies are identifying, measuring, monitoring and controlling their financial risks. This course will be supplemented by domestic and international case studies and recent articles on topical themes in the insurance sector. Esta clase tambien se ofrece en Espaol.

Identify key regulatory changes affecting the insurance sector Evaluate recent trends in natural disasters and terrorism and their effect on insurance companies Describe key products in insurance companies that have embedded derivatives Identify financial derivatives being used by insurance companies to hedge risks Identify and apply mechanics of insurance specific derivatives Compare and contrast capital market solutions being used by insurance and reinsurance companies