Several years ago, we designed this jolt to help the employees in an insurance company to get a feel for the basic concepts related to their industry. After conducting this activity several times and after debriefing the participants, it became clear that this jolt is useful for all types of participants to explore risk management. Here is the latest version of the jolt.

SYNOPSIS

The participants take turns turning over cards from a shuffled deck. They incur a loss if they turn over certain cards. At the beginning of the game, participants can purchase insurance to protect themselves from their losses.

PURPOSE

To explore the advantages and disadvantages of buying insurance to avoid the impact of unexpected losses.

PARTICIPANTS

Minimum: 5
Maximum: Any number, divided into playgroups of five to seven
Best: 10 to 20

TIME

5 minutes for the activity. 10 minutes for debriefing.

SUPPLIES

Playing cards, one deck for each playgroup
Chips, 200 for each playgroup
Bowl (for storing the chips), one for each playgroup

ROOM SET-UP

Arrange round tables with seats for the members of each playgroup

PREPARATION

Organize playgroups. If there are more than 7 participants, divide them into playgroups of four to seven people each. (It does not matter if some groups have one more player than the others.)

Set up the supplies. Seat each playgroup around a separate able. Place a shuffled deck of cards, face down, in the middle of the table. Also place a bowl of 200 chips (or coins or paper clips or some other type of counters) on the table. Ask each player to take 20 chips from the bowl.

FLOW

Appoint the Insurer. Ask the players to select the most serious looking person in the playgroup. Appoint this person as the Insurer.

Explain the insurance procedure. Tell the participants that during the game, they may unpredictable losses. Each loss requires the player to pay chips from his or her hand to the bowl. If they are insured, however, their loss will be paid by the Insurer. Any player can purchase insurance by paying 5 chips to the Insurer before the game begins.

Explain potential losses. During the game, each player will take turns to pick the top card from the shuffled deck and turn it face up. If the card is a spade with a number, the player incurs a loss equal to the number on the card. (Ace of spades incurs a loss of one chip.)

Explain potential gains. If a player turns over the Jack, Queen, or King of spades, he or she gains 10 chips. This lucky player picks up 10 chips from the bowl.

Purchase insurance. Before the start of the game, invite the players to buy insurance if they want to. They do this by paying the Insurer 5 chips from their hand.

Begin the game. Ask the first player to pick the top card from the shuffled deck and turn it over. Depending on the card, the player does one of the following:

If the player turns over a spades card, he or she loses a number of chips equal to the number on the card. For example, if the player turns over the 7 of spades, he or she loses seven chips. Uninsured players drop the appropriate number of chips in the bowl. If the player is insured, the Insurer drops the appropriate number of chips in the bowl on behalf of the player.
If the player turns over the Jack, Queen, or King of spades, he or she gains 10 chips. The lucky player picks up 10 chips from the bowl (whether or not he or she is insured).
If the player turns over a card with clubs, hearts, or diamonds, there is no loss or gain. The turn goes to the next player.

Continue the game. Players take turns to turn over the next card on top of the deck. If it is a spades card, there is a loss or gain. If it is of any other suit, the turn goes to the next player.

Conclude the game. The game ends when every player has had an opportunity to turn over five cards.

Determine the winner. At the end of the game, the player with the most number of chips is the winner.

DEBRIEFING

At the end of the game, ask the players to reflect on their experience. Conduct a debriefing discussion using questions similar to the following:

How did you decide whether or not to purchase insurance in this game? Looking back on what happened during the game, was your decision the correct one?
Did you systematically work out the probabilities of incurring losses in this game? What was the logic behind your decision?
Did you incur a loss during the game? If so, how did you feel about it?
Did some other player incur a loss during the game (while you did not)? How do you feel about it?
Do you have health insurance and automobile insurance? How do these types of insurance relate to this game?
Should there be different rates of insurance to cover different levels of loss in this game?
If you are playing this game with a partner and if your partner does not want to purchase insurance, what would you tell him or her?
How do the behavior of other players change your decision about purchasing insurance? If no other player purchased insurance, would you purchase it? If everyone purchased insurance, would you abstain from purchasing it?
What unexpected losses are likely to occur in your business? How would you insure against these losses?
Which of these types of insurance would you not buy: identity theft, loss of professional reputation, lawsuits claiming infringement of intellectual property, job-related injuries, and travel delays and cancellations? What are your reasons for not insuring yourself against these possibilities?
If you are the Insurer in this game, how would you protect yourself against an unexpectedly large number of losses among your clients?
If we were to play this game again, would you change your decision about purchasing insurance? Why or why not?

LEARNING POINTS

Different people have different opinions about purchasing insurance. The decision to whether or not to purchase insurance depends on your personality type and previous experience.
You can logically compute the probabilities of incurring losses and make the decision about how much insurance to buy. But even after such logical analysis, you could be wrong.