This document discusses various types of insurance coverage for businesses to manage risk. It describes health insurance options for employees like HMOs and PPOs. It also covers disability insurance, workers compensation, liability insurance, and life insurance for businesses to protect against losses from injury, lawsuits, death and ensure business continuity. The goal is to understand and mitigate different risks through various insurance strategies.

1. GROUP 4
BONUS CHAPTER C
MANAGING RISK
Robert Rhyne
Blake Copeland
Tony Puglisi
Brent Moore
Kevin Partin

2. UNDERSTANDING BUSINESS RISK
GOAL 1
• Understand what risk you face
• (ERM) Enterprise Risk Management Program
1. What risk the program manages
2. What processes technologies and investment are
required
3. How management efforts will be coordinated.

3. MANAGING RISK
GOAL 2
• Risk- is the chance of loss, the degree of probability
of loss, and the amount of possible loss.
• Two kinds of risk:
• Speculative risk: a chance of profit or loss
• Pure risk: is the threat of loss with no chance for
profit.
 Pure risk is mostly concerned by businesspeople because it
threatens the very existence of some firms.
 Once identified firms have several options:
1.Reduce the risk
2.Avoid the risk
3.Self-insure against the risk
4.Buy insurance against the risk

4. REDUCING RISK
GOAL 2
• Firms can reduce risk by establishing loss prevention
programs.
• Retail Stores use mirrors, video cameras, and other
devices to prevent shoplifting.
• Tyson Foods killed and buried some 15,000 hens in
northwestern Arkansas because the government
suspected they had been exposed to bird flu.
• Employees can reduce risk as well.
• High insurance rates have forced some firms to go
beyond just preventing risks to avoid them, in
extreme cases by going out of business.

5. AVOIDING RISK
GOAL 2
• Its impossible to avoid every single risk due to there
always being chances of fires, theft, accident, or
injury.
• Lawsuit threats have drive drug companies to stop
making vaccines, and some workers refuse to work
at hazardous locations.
• Losing members that do not have liability coverage.
• Companies have been cutting investments to avoid
chances of financial losses.

6. SELF INSURANCE
GOAL 2
• Self insurance is setting aside a calculated amount of
money to account for future potential losses
• It is necessary to be able to price or rate the risk so that
the proper amount of coverage can be retained.
• Not used for catastrophic risks, as the loss would be too
high
• Can be cheaper than commercial insurance
• Full self insurance is rare as the best coverage comes
from a combination of self insurance and commercial
insurance. Usually the commercial insurance is used to
pay losses beyond the coverage of the self insurance.

7. BUYING INSURANCE COVERAGE
GOAL 2
• Insurance is a form of Risk Management used to hedge
against the risk of a contingent, uncertain loss.
• Coverage should be adequate to cover any and all
potential losses.
• Types of Insurance Include:
– General Liability
• Covers accidents, injuries and claims of negligence.
– Product Liability
• Covers liability due to defective products
– Professional Liability
Protects against malpractice and other liability attributed to services
performed.
– Commercial Property Insurance
• Covers everything related to the loss and damage of company property.

8. UNDERSTANDING
INSURANCE POLICIES

9. INSURANCE POLICIES
• Insurance Policy- Written contract
between the insured and an insurance company
that promises to pay for all or part of a loss by the
insured
• Premium- cost of the policy to the insured
• Claim- a statement of loss sent to insurance
company to request payment

10. LAW OF LARGE NUMBERS
-If a large number of people are exposed to the
same risk, a predictable number of losses will occur
during a given period of time
-Helps insurance companies determine appropriate
premiums for each policy it issues against that loss

11. RULE OF INDEMNITY
• A i nsur ed per son cannot col l ect m e t han t he
n or
act ual l oss f r om an i nsur abl e r i sk
• A per son cannot pur chase t w i nsur ance pol i ci es,
o
even f r om t w separ at e com
o pani es, and col l ect f r om
bot h f or t he sam l oss
e

12. TYPES OF INSURANCE
COMPANIES
• Stock Insurance Company- Owned
by stockholders
• Mutual Insurance Company- Owned
by policyholders
• Any excess funds go to policyholders in the form of dividends or
premium deductions

13. INSURANCE COVERAGE FOR
VARIOUS KINDS OF RISK
GOAL 4
• There are many types of insurance to cover losses
• Health Insurance
Business’s offer health insurance to cover physician fees,
exams, and prescriptions
• Health Maintenance Organizations (HMOs)
Offers a full range of health benefits
Contracted to particular doctors, hospitals, and health
care systems
Members must use providers on the approves list.

14. • Preferred Provider Organizations (PPOs)
Also contract with hospitals and physicians.
Members pay part of the bill.
Can use outside providers but pay a deductible
before PPO makes any extra payment on the bill
Can cost 80% less than some individual coverage
plans.
• Health Savings Accounts (HSAs)
Tax-deferred savings accounts linked to low cost, high
deductible health polices
Goal is to have employer take current high cost related
to health cost and deposit that into a health savings
account.

15. DISABILITY INSURANCE AND WORKERS
COMPENSATION
GOAL 4
• Disability insurance
Replaces part of your normal income (usually 50 to 70%)
Usually out of work for 60 days before you start to collect.
one should purchase if not already offered by employer.
Payments and premiums can vary according to
age, occupation, and income.
• Workers Compensation
Guarantees payment of wages, medical care, rehab for
injury from work.
Employers are required to provide this.
pays benefits for survivors as result of death from work
injury.
Varies from company to company based of size, safety
record, payroll, and type of hazard workers face on the job.

16. • Liability insurance
Covers the loses of businesses or persons after being sued.
Also called Malpractice insurance.
Covers business, lawyers, doctors, in negligence cases
Covers Manufactures in cases involving faulty products
• Life insurance for Businesses
Protect those left behind incase of death, so that business can continue.