It’s a question that many professors face: How can I make abstract concepts like risk, value, and probability meaningful to students?
Two professors of business at the University of North Texas at Denton may have found an answer that uses the conventions of their discipline: asking students to insure their grades.
For years, Nat Pope, an associate professor, and Yu-Luen Ma, a professor, had been teaching business students the finer points of how insurance works. But they weren’t quite connecting. “It’s always a hard thing for students to get their head around — what the principles of insurance are,” Pope said.
One year, they decided to change tack. They run a sort of live experiment in which students can insure their semester grade.
how it works:
Throughout the semester, students earn points, like dollars, with the hope of a potential “payout” of 100 points after the final exam. Every student, of course, is familiar with the feeling of risk heading into that exam. So just before the final, students have three options: Do nothing (what Ma and Pope call “hope for the best”), study (“risk-management loss-control strategies”), or protect against that risk by spending the points they’ve earned on “grade-insurance contracts.”
The twist: Students draft the contracts themselves. As Ma and Pope teach about premiums, actuarial number crunching, and risk pools, students form small teams to put those concepts into practice. Before the final, they collect anonymized data on their classmates’ performance and make products of their own.
The groups use the data to calculate a person’s likelihood of loss on the final exam — how many points he or she is likely to miss — and the magnitude of that loss. Groups divide students based on their expected performance, determining a premium for each pool. Then they build conditions into their contracts to prevent against fraud and “moral hazard” — say, a student spends a few points on insurance and intentionally bombs on the final.
In effect, well-built contracts will benefit only students who encounter some unexpected event going into the final, like a sudden illness. The best ones protect against loss and promote smart risk management — studying. It’s a bit like “purchasing home insurance while still having fire extinguishers in the house,” Ma and Pope said.
Groups can even offer creative bonuses for certain pools. High-performing students, for instance, might be eligible for an insurance package that offers private study groups led by a course alumna.
“This isn’t about protecting students’ grades,” Pope said. “It’s about having students perform the insurer’s function.”
Eventually, Ma and Pope said, students recognize that too. When the project is introduced, Ma said, students immediately think about it as consumers: How can I get the most coverage for the cheapest premium? “But as soon as they started working on the project and thinking like an insurance company, then they realized why products like that cannot exist in the marketplace,” she said.
Kaitlyn Mustico, a senior mathematics major who took Ma’s class last fall, said the project had helped her “learn the subject more concretely” than if she had done rote memorization.
Mustico and her group didn’t know anything about insurance when they started, she said. Eventually, they figured out what data they needed to design insurance products: factors like a classmate’s year, GPA, past exam grades, and average number of hours studying. Those data points, with Ma’s approval, went into a form that each student filled out and submitted. Then Ma compiled and anonymized it.
All of that work culminates in an end-of-semester insurance fair, complete with businesswear and sticker-spattered trifolds. Most students choose not to buy grade insurance, which is normal, Ma and Pope said. After all, insurance products aren’t meant to leave buyers better off, but to protect against loss.
“Students realize that having insurance in this case is not a panacea,” said Pope. Instead, they learn their best option is to study harder.
The project does, of course, mean a hefty workload for the instructors. Ma and Pope act as regulators, analyzing and vetoing faulty products. And even for seasoned Excel wranglers, it takes time to track 10 or more insurance policies, their purchasers, and their perks in the final weeks of the semester.
“It’s worth it in the end,” Pope said, “because students can get really creative.”
– by Becky Supiano, Teaching Newsletter: The Chronicle of Higher Education