This is what's known as my desperate attempt to teach myself the intricacies of insurance so that I can pass my test. I have an encyclopedic knowledge of everything I've written down to the last detail. Might as well use that! So without further ado, I present the "Baymax Teaches" series.

Chapter One: Risk Management

Being part of a superhero team is risky. It involves an incredible amount of dangerous work. As Big Hero 6 became more popular around San Fransokyo, the team began to think that purchasing insurance would be a wise investment, especially since they knew all too well how fleeting life could be.

Crowding into Fred's bedroom, the team seated themselves comfortably in front of Baymax for their consultation about insurance. Fred's father knew some people who could insure them but they needed to know as much as possible about it before they could sign up for it.

"I have downloaded a database on insurance." Baymax said in his usual cheerful tone. "It is my hope that these lessons will be informative. Do any of you have any questions before I get started?"

"Yeah." Gogo grumbled. "Why do we all need to know this stuff? Can't you just be our resident expert?"

"That is a good question." Baymax replied. "The reason you all must know the basics of insurance is in case one of you dies or is severely injured. It is my job to keep you healthy but accidents can occur and the more you know, the better off you will be. Now, shall I get started?"

"Yes! Let's do this!" Fred cheered. "INSURANCE, YEAH!"

"This isn't going to take very long, is it?" Honey asked tentatively.

"There are twelve chapters of material to cover." Baymax said. "However, I will skim over some of the less important chapters for convenience sake."

"Great." Hiro mumbled, already looking bored. "This is such a fun way to spend an afternoon."

"I'm glad you are already enjoying yourself." Baymax told him, the sarcasm clearly going over his head. "Can anyone tell us what insurance is?"

"Getting money if something bad happens." Wasabi replied, getting out a notebook. "Well something like that, see, you pay the company and if something does happen, they'll help cover the costs."

"That is correct in theory." Baymax said. "Put simply, insurance is a device that transfers the chance of a financial loss among a larger number of people. Because more people are involved, there are more resources to cover payments and the cost can remain small. Insurance is based on the Principle of Risk Transfer."

"So, say we each paid a dollar every week." Honey clarified. "That's $6 a week. And if one of us needs that money, they would use it. But since we all are sharing the risk of that money being needed, that's what you mean by transferring risk?"

"That is an excellent way of putting it. Have a lollipop." Baymax held up a pink lollipop, which Honey accepted cheerfully.

"My first lesson is about Risk Management." Baymax went on. "Who here can tell us what a risk is?"

"I know, I know!" Fred waved his hand in the air. "It's a game! I have the Star Trek and Lord of the Rings version!"

"That is incorrect." Baymax told him in a patient tone. "Although there is a game with a similar title, a risk, in terms of insurance, is the possibility that a loss of the chance of a loss may occur. It is one of the reasons insurance is purchased."

"I see what you mean." Fred pointed dramatically at Baymax. "It's like gambling, isn't it? Like, you don't know if you're going to win or lose so it's a risk."

"That is an example of a Speculative Risk." Baymax nodded. "That means that it is uncertain as to whether the final outcome is a gain or loss. It is not insurable."

"Our work is risky." Gogo shrugged. "So that's risk too."

"Also correct. Our work as superheroes is an example of Pure Risk. That means there is a possibility of a loss, in your case that would be a loss of life, health, or limb, with no chance of gain. It is the only type of insurable risk but it can only result in a loss or no change."

"So leaping off a building in pursuit of a bad guy and landing on top of him and him not getting away but breaking your arm doing it, that's a pure risk?" Fred said in one breath.

"A stupid risk." Gogo muttered.

"Foolish as that risk may be, that would be a pure risk because there would be no chance for gain. You would need to pay your hospital bills and pay for treatment for your broken arm." Baymax said. "Now can anyone tell me what a Loss is?"

"Having something and then not having it?" Hiro asked in bored tone.

"Correct." Baymax said cheerfully. "A loss is an unintentional reduction, decrease, or disappearance of value of a person or property insured by a policy. It is the reason for claims against an insurance policy."

"Like in my broken arm story, it's my money for bills, my time for being in the hospital, and the use of my arm!" Fred flexed his fingers as he spoke. "This risk stuff is totally interesting. Can we play it now?"

"There is still plenty to go over." Baymax said patiently. "The next term is Exposure. That is a measure of the vulnerability of a loss. How might that be expressed?"

"Dollars." Wasabi spoke up. "Or time maybe?"

"Dollars are a common unit but Exposure Units are used to determine the insurance rates. Said rates are based on medical history, sex, age, and occupation."

"So ours would be pretty high." Hiro clarified. "Being superheroes, you know."

"Correct. Have a lollipop." Baymax handed Hiro a blue lollipop before continuing. "Can anyone tell us what Hazards are?"

"Yeah totally, it's that sign with the arrows making a triangle." Fred made a triangle with his fingers. "Tell me I'm right, I know I'm right!"

"That sign is used on hazardous materials. However, it is not a hazard in and of itself. A Hazard is a circumstance of condition that increases the possibility that a loss will take place. What is an example of a hazard?"

"Well if you have bombs in your basement, that would be a hazard because they might explode." Gogo rolled her eyes. "But that would be more interesting than this lesson right here so I'm not complaining."

"You are correct." Baymax nodded. "There are three kinds of hazards. Physical Hazards are hazards that cause the body to become physically stressed and can increase the chance of a loss. Examples are slippery floors or skydiving."

"Or leaping off a building." Fred added.

"Correct. A Moral Hazard is a hazard that is a result of maximizing behavior. For example, dishonesty is a moral hazard."

"So doing bad stuff on purpose." Fred clarified. "Like every supervillain."

"Yes. Have a lollipop." Baymax handed Fred a lollipop, which he accepted with enthusiasm. "The third type of hazard is a Morale Hazard. These are hazards that arise from the insured's indifferent attitude to loss, like not wearing a seatbelt, because they are careless and irresponsible."

"And jumping off buildings when there are 5 others who could potentially catch a fleeing criminal." Gogo added. "That would be a Morale Hazard."

"Correct!" Baymax exclaimed. "Have a-"

"I don't need a lollipop, I need to not have to listen to any of this anymore." Gogo interrupted.

"Very well. Sugar may have an adverse effect on your ability to focus on my lesson." Baymax turned to the rest of the group. "Does anyone know what Perils are?"

"Dangers!" Wasabi exclaimed. "Bad things that could happen."

"Correct. Have a lollipop!"

"Exactly how many lollipops do you have?" Hiro cut in as Wasabi accepted his treat.

"107." Baymax replied. "Tadashi kept me well stocked. "Perils are causes of a possible loss outlined in an insurance policy. These losses are a possibility of happening. Tornadoes, floods, and hurricanes are perils because they could cause a loss."

"Long lessons on insurance could cause death by boredom." Gogo complained.

"This is important stuff!" Wasabi countered. "What if we need to know it?"

"We can read your notes." Gogo said, eyeing his notebook.

"Aww don't go, Gogo!" Honey begged. "You're my ride home. Besides, I'm learning a lot!"

Fred snicked. "Don't go go go!"

"Ugh fine." Gogo turned to Baymax again. "Proceed."

"My next lesson is on Methods of Handling Risk." Baymax told them. "The first way is Avoidance."

"As in avoiding the risk?" Fred asked, leaning forward as if he was expecting an exciting answer.

"Precisely. Avoidance is ending a specific exposure or taking steps to remove a hazard. For example, a person who is afraid of being in a car accident would not drive or ride in a car. Avoidance is not a practical way to handle risk."

"Depends on what we're avoiding." Gogo mumbled.

"Retention is when an insured has decided to assume the financial responsibility for certain events by the use of deductibles, co-payments, or self insurance." Baymax continued. "Retention results from the reduction of expenses and improvement of cash flow, the increased control of claim settlements, and funding losses that are uninsurable."

"So basically paying for things yourself." Wasabi clarified.

"Essentially correct." Baymax said. "Can anyone tell me what Sharing is?"

"OH! I KNOW!" Fred waved his hand in the air. "Sharing is caring!"

"While incorrect in the context of our lesson, your sentiment is admirable." Baymax nodded to Fred. "All of us should care for each other. That's the basis of insurance."

"Yeah. That's what it's about." Hiro muttered.

"Sharing is the dividing or sharing or a risk for a business or group of individuals with the same or similar exposure to a loss." Baymax explained. "You decrease the severity of the risk for yourself if you share it among a large group of people."

"That's true." Honey spoke up. "That way everyone suffers less."

"Precisely. Moving on, Reduction is an attempt to reduce the possibility of a death, injury, or the loss of property." Baymax went on.

"So being safe. Taking precautions so that losses are less likely to occur." Wasabi explained.

"That is correct." Baymax handed him a lollipop. "Transfer involves transferring all or part of a risk to another party. The most common method of risk transfer is purchasing insurance on your home."

"So basically transferring the risk or part of the risk to another party. Maybe one who can handle it better." Wasabi clarified.

"Insurable risks have characteristics that make loss predictable, which allows insurers to adequately prepare for losses that might occur." Baymax went on. "The Law of Large Numbers is the grouping of significant large pools into classes with similar risks to enable an insurer to predict losses and establish rates. Homogeneous refers to groups with the same exposure to a loss."

"So the Law of Large Numbers is pretty much the statistics that predict what losses to expect in a given time frame?" Honey asked.

"Put simply, yes."

"And homogeneous means groups of people who are expected to have similar losses?" Wasabi added.

"Correct." said Baymax. "Loss must be definite and measurable. It must have monetary value. In life insurance, this value is life or ability to earn income. In health, it is economic loss measured by lost wages or by incurred medical expenses."

"So if you all lost me, you'd lose some very valuable Incredibles fanfiction." Fred clarified. There was a long pause as everyone turned to look at him. "Come on, it's a loss for the 27 followers I have!"

"If your ability to write fanfiction had monetary value, that would be an insurable loss of sorts." Baymax considered. "Catastrophic Peril Exclusion refers to the fact that insurance companies generally will not insure risks that will expose them to catastrophic losses. Examples are losses caused by acts of war, nuclear risk, and floods."

"So pretty much anything extreme and deadly?" Hiro asked.

"Insurance must not be mandatory. Insurers must not be forced to issue a policy." Baymax continued. "In addition, loss must be due to chance. The loss must be outside the control of an insured, like a heart attack."

"So something you can't predict or control." Honey said.

"That is correct. Finally, the loss must be predictable."

"But you said it can't be predicted or controlled!" Fred raised an eyebrow. "Did I just catch a plot hole here?

"Statistically predictable but perhaps not predictable by an individual." Baymax clarified. "Adverse Selection is a term that describes the tendency of an individual with a greater than average chance of a loss to purchase insurance."

"We're adverse selection." Hiro said. "Because we're more likely to need the insurance."

"True. Since you're more risk prone, your coverage would be limited with higher premiums. Or the company may reject the risk entirely."

"Great to know. If we're rejected, we'll have sat through this lesson for no reason." Gogo rolled her eyes.

"The last term is Reinsurance. Reinsurance is an agreement between insurance companies under which one insurance company transfers part of all of its risk to another." Baymax continued.

"So it's a bit like Sharing?" Wasabi asked.

"A bit like sharing but it is rather like insurance that insurance companies need. It provides protection against catastrophic loss."

"Great." Gogo sat up. "Are we done?"

"You are done for now." Baymax nodded. "Take a short break and then come back for lesson two!"

The team groaned but stood up to stretch their legs. This was going to be a long, very boring day.

Sorry for how boring this story is. I'm trying to make it interesting for my sake but it's probably not possible. But hey, at least I'll pass my test!

GREAT SCOTT! The future is today! Let's make it a good one. Happy Back to the Future Day, everyone!

~KateMarie999