Objective:
Students will analyze how insurance markets function, explore the benefits and challenges of insurance, and evaluate how risk is managed in economic systems.
Materials Needed:
- Handouts with key concepts of insurance, including moral hazard, adverse selection, and risk pooling.
- Examples of real-world insurance markets (e.g., health, auto, life).
Lesson Steps:
1. Introduction (10 minutes):
- Define insurance and explain its purpose in mitigating risk for individuals and businesses.
- Introduce key concepts:
- Risk pooling: How insurance spreads risk across a group.
- Premiums: Payments made to maintain coverage.
- Moral hazard: How insurance can alter behavior (e.g., taking greater risks).
- Adverse selection: The tendency for higher-risk individuals to seek insurance.
- Briefly mention how insurance markets can fail or succeed based on these factors.
2. Viewing Clip (5 minutes):
- Show the Game of Thrones clip or summarize the scenario where insurance or financial risk-sharing is discussed in Westeros.
- Set the context: Highlight the role of risk management and how the system reflects broader economic principles.
3. Group Discussion (15 minutes):
- Divide students into small groups to discuss:
- How does the betting market in the clip create a form of insurance for the captain?
- What are the premiums?
- How does the betting market represent the pooling of risk?
- Why is insurance important for managing risk?
- How might moral hazard and adverse selection affect an insurance market in general?
- How might moral hazard and adverse selection arise in the context of the betting market in the clip?
- What parallels can be drawn between the Westeros example and modern insurance systems?
4. Concept Application (15 minutes):
- Case Study Analysis:
- Provide examples of real-world insurance markets:
- Health insurance (e.g., managing public vs. private coverage).
- Auto insurance (e.g., mandatory insurance laws).
- Life insurance (e.g., risk assessment and premiums).
- Ask students to analyze these markets using the following questions:
- What are the benefits of these insurance systems?
- What challenges arise (e.g., fraud, coverage gaps)?
- How do governments or companies address issues like adverse selection?
5. Wrap-Up and Reflection (10 minutes):
- Summarize the importance of insurance in managing risk and stabilizing economies.
- Pose a discussion question: How would your life or future career be affected if insurance were unavailable or poorly managed?
6. Activity/Homework (15 minutes):
- Design an Insurance Plan:
- Students work in small groups to design an insurance plan for a fictional town in Westeros facing specific risks (e.g., dragon attacks, food shortages).
- Consider:
- What risks to cover?
- How to set premiums?
- How to minimize moral hazard and adverse selection?
- Groups present their plans, explaining how their system balances fairness, efficiency, and risk mitigation.