Teaching Insurance with an Insurance Management Computer Game

Abstract

With the intensive use of computers in business schools' curriculums the last ten years, many computer games have been developed. This paper is concerned with such a project. The computer game developed in this paper simulates the operation of an exc'usive agency propertyliability insurance company. The paper is divided into sections describing the regulatory environment, insurance operations, investment operations, and evaluation of the gaming process. In the appendix a description of how to interpret game results is shown and explained, based on a simple computer printout. Throughout the paper examples are given where students have obtained valuable information from operating the game. Although many computer games in management, marketing, and finance have been written, few are available in the insurance area. The computer game with which this paper is concerned was developed to increase insurance students' understanding of property-liability insurer operations and to introduce them to some of the problems of insurance company management. The game depicts the operations of an exclusive agency property-liability insurance company that sells only homeowners insurance. The game is organized so that the operations of the insurance company are divided into two major components-insurance operations and investments. Insurance operations include all functions associated with the insurance side of the business: selling, underwriting, and the paying of losses. In the game there are five decision variables the student controls that affect insurance operations: price, underwriting, marketing, commissions, and financial rating. The investment component involves the management of the insurance company's investment portfolio which consists of three assets: cash, bonds, and common stocks. The major interdependence between the two components is through the surplus account. The manner in which the game is played is discussed under the following headings: regulation, insurance operations, investment, evaluation, and summary. James S. Trieschman is Associate Professor of Risk Management and Insurance, University of Georgia. He was a winner of an award for a feature article in the Journal of Risk and Insurance in 1973, and was a Harry J. Loman Fellow in 1974. This paper was submitted for publication, July 1974.