Lecture 5 - Insurance: The Archetypal Risk Management Institution
recorded by: Yale University
published: Oct. 7, 2009, recorded: March 2008, views: 4604
released under terms of: Creative Commons Attribution No Derivatives (CC-BY-ND)
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Insurance provides significant risk management to a broad public, and is an essential tool for promoting human welfare. By pooling large numbers of independent or low-correlated risks, insurance providers can minimize overall risk. The risk management is tailored to individual circumstances and reflects centuries of insurance industry experience with real risks and with moral hazard and selection bias issues. Probability theory and statistical tools help to explain how insurance companies use risk pooling to minimize overall risk. Innovation and government regulation have played important roles in the formation and oversight of insurance institutions.
- Fabozzi et al. Foundations of Financial Markets and Institutions, chapter 6
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