Insurance Games: Teaching Adverse Selection & Information Asymmetry
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New! Online Assignment: Insurance Market

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Phil Limberg

New! Insurance Market Module Debuts in Online Assignments

Our insurance market game teaches the classic concept of adverse selection with information asymmetry and is now available in Online Assignments. Going with a bold vision of human ability, we put our students into the shoes of an insurance company selling home owner insurance to protect adventurous space frontier home owners from meteor showers on Mars. Naturally, the market eventually breaks down as the cost of the insurance premium only attracts home owners with relatively expensive homes.

As with our other Online Assignments, this new insurance market assignment comes with interactive games, learning videos (including a debrief video that brilliantly explains the death spiral and adverse selection from our friends at Marginal Revolution University), and reflection surveys - all designed for asynchronous teaching. Simply add the insurance market module to a playlist, schedule it to run, and voila: your students will be ready to play and learn!

Key Concepts and Learning Loop

This Online Assignment uses our video introduction and survey tool with instruction comprehension questions to make sure that your students are ready to make some informed insurance premium offers to our Mars emigrants. The Mars emigrants are our bots who buy or reject based on the offered premium. We give students 3 rounds to facilitate the development of a death spiral.

The image above shows a student in the attempt to sell a profitable insurance premium but finds that only Mars emigrants whose homes are worth $$$ and $$$$ are willing to buy the insurance which results in a loss. This student is learning that they can only cover their costs by incrementally increasing the premium which drives out more and more of their buyers and in consequence still leads to losses.

The debrief video explains what happened and some reflection questions complete the learning loop so that students understand the concepts of asymmetric information, adverse selection and the death spiral.

This is the suggested flow of this Online Assignment, but you as an instructor can of course customize this assignment by changing any parameters, such as the number of repetitions or adding other resources if you prefer your own explanation videos and images.

If you want to learn more about how to customize this or any of our other Online Assignments, get in touch with our team. Whether you’re teaching in person, online, or both, MobLab has got you covered with Online Assignments for asynchronous learning.