Principles of Risk Management and Insurance 12th Edition

Book Preface

This text deals with risk and its treatment. Since the last edition of Principles of Risk Management and Insurance appeared, several unprecedented events have occurred that clearly demonstrate th destructive presence of risk in our society. In 2010, one of the most devastating earthquakes in recent history struck poverty-stricken Haiti, causing enormous human suffering, an estimated 316,000 deaths, one million homeless people, and widespread property destruction. In 2011, a deadly earthquake hit Japan that caused a devastating tsunami and a nuclear accident crisis. More than 18,000 people died, thousands more are missing, and estimated property damage may exceed $300 billion. During the same period, the Obama Administration introduced legislation to reform a broken health-care delivery system. Despite formidable opposition by the Republicans, and heated and bitter debate, Congress enacted the Affordable Care Act in March 2010. The new law extends health insurance coverage to millions of uninsured people, provides subsidies to purchase insurance, and prohibits certain abusive practices by insurers.

Finally, in 2012, a deranged gunman randomly killed 12 people and wounded at least 58 others in a theater in Aurora, Colorado. This tragic act again highlights the fact that spree killings are not isolated events, and that the risk of death or injury is markedly present.

Flash forward to the present. The economy and housing markets are slowly recovering from the second most severe economic downswing in the nation’s history; although declining, unemployment remains at historically high levels; and a dysfunctional Congress remains hopelessly deadlocked because of deeply held ideological beliefs by its members. The Affordable Care Act remains controversial, and Republicans in Congress are determined to repeal it. The House has already enacted legislation to repeal the Affordable Care Act. To say that we live in a risky and dangerous world is an enormous understatement.

The twelfth edition of Principles of Risk Management and Insurance discusses these issues and other insurance issues as well. As in previous editions, the text is designed for a beginning undergraduate course in risk management and insurance with no prerequisites. The twelfth edition provides an in-depth treatment of major risk management and insurance topics. Coverage includes a discussion of basic concepts of risk and insurance, introductory and advanced topics in risk management, functional and financial operations of insurers, legal principles, life and health insurance, property and liability insurance, employee benefi ts, and social insurance. In addition, the new Affordable Care Act is discussed in depth. Once again, the twelfth edition places primary emphasis on insurance consumers and blends basic risk management and insurance principles with consumer considerations. With this user-friendly text, students can apply basic concepts immediately to their own personal risk management and insurance programs.

KEY CONTENT CHANGES IN THE TWELFTH EDITION

Thoroughly revised and updated, the twelfth edition provides an in-depth analysis of current insurance industry issues and practices, which readers have come to expect from Principles of Risk Management and Insurance. Key content changes in the twelfth edition include the following:

• Health-care reform. Chapter 15 has an in-depth discussion of the broken health-care delivery system in the United States, which led to enactment of the Affordable Care Act.

• Enactment of the Affordable Care Act. Chapters 15 and 16 discuss the major provisions of the new Affordable Care Act and its impact on individual and group health insurance coverages. Primary attention is devoted to provisions that have a major fi nancial impact on individuals, families, and employers.

• New homeowners insurance policies. The Insurance Services Offi ce (ISO) has introduced a new 2011 edition of the homeowners insurance policies that are widely used throughout the United States. Chapters 20 and 21 discuss important changes in homeowners insurance, especially the Homeowners 3 policy.

• Updated discussion of life insurance marketing. The section on life insurance marketing and distribution systems has been completely updated and substantially rewritten. Chapter 5 discusses the current distribution systems and marketing practices of life insurers.

• New developments in employer-sponsored health insurance plans. Employers continue to grapple with the rapid increase in group health insurance premiums and continually seek new solutions for holding down costs. Chapter 16 discusses new developments in group health insurance to contain higher health-care costs and premiums.

• Impact of the Affordable Care Act on Medicare. Chapter 18 discusses important provisions of the Affordable Care Act that have a direct impact on the Medicare program. These provisions are designed to control cost and make Medicare a more efficient program in protecting seniors against the risk of poor health.

• New Insight boxes. The twelfth edition contains a number of new and timely Insight boxes. Insights are valuable learning tools that provide real-world applications of a concept or principle discussed in the text.

• Technical accuracy. As in previous editions, numerous experts have reviewed the text for technical accuracy, especially in areas where changes occur rapidly. The twelfth edition presents technically accurate and up-to-date material.