Principles of Risk Management and Insurance, Global Editon, 14th Edition

Book Preface

The first edition of this text appeared 37 years ago in 1982. The basic objective was to write  an intellectually stimulating and visually attractive  text from which students could learn and professors  could teach. The fundamental objective for this edition remains the same. This edition provides students  with an in-depth treatment of major risk management and insurance topics in a visually attractive and  user-friendly product with no prerequisites. The 14th edition is unique in this respect. Students can immediately apply the basic principles in this text to their  own personal risk management and insurance programs to deal with major risks that create great economic insecurity.

CONTENT CHANGES IN THE 14TH EDITION
Thoroughly revised and updated, the 14th edition provides a comprehensive analysis of major life and  health insurance contracts and property and liability  insurance coverages, which readers have come to  expect from Principles of Risk Management and  Insurance. Key content changes in this edition include  the following:
• Enterprise risk management. Chapter 4 provides  a revised and expanded treatment of enterprise  risk management.
• Changes in marketing practices. Chapter 5 covers significant changes in marketing practices. In  particular, the fields of wholesale insurance and  surplus lines insurance have been evolving rapidly, which has led to a new classification system for intermediaries in those areas. Wholesale  insurance refers to property/casualty intermediaries who obtain business only from “retail”  agents and brokers and do not deal with the  public. The Wholesale and Specialty Insurance  Association has been formed to provide a single  voice for intermediaries in the field. In addition,  Chapter 5 deals with shifts in consumer preferences that have produced changes in life insurance marketing and financial planning.
• Government regulation. Chapter 8 adds new material to enhance the understanding of state insurance  regulation. Additional insights have been added dealing with insurance regulation following the severe  2008 financial debacle and economic downswing.
• Estate tax law. Policyholders with large taxable  estates often purchase life insurance for federal  estate tax purposes. Chapter 13 deals with important considerations in purchasing life insurance  for federal estate tax purposes. Updates have been added to reflect recent changes in the federal estate tax law.
• Poor performance of health care delivery system.
When compared to advanced foreign nations, the  United States scores last or low on most measurements of health care delivery systems and health  insurance. Chapter 15 provides an updated analysis of the broken and flawed health care delivery system in the United States.
• Evaluation of the Affordable Care Act. Chapters  15 and 16 provide a current analysis of the Affordable Care Act (ACA) and an evaluation of  its effectiveness in reducing the number of uninsured individuals and family members. The 14th edition analyzes the most egregious defects now  found in the current ACA program.
• Update on developments in employer-sponsored  group health insurance plans. Employers continue to struggle with the rapid increase in group  health insurance premiums and continue to seek  new solutions for holding down costs. Chapter 16  is an update on current trends in group health  insurance and proposals to slow health care cost increases.
• Changes in group life and health insurance. Chapter 16 also deals with changes in group life and health insurance and the market for group  health insurance. For example, high-deductible  health insurance plans combined with health savings accounts are making substantial gains in the  preferred provider organization (PPO) market.
• Obsolescence of certain retirement plans. Chapter  16 recognizes that certain older retirement plans  such as money purchase retirement plans and Keogh plans for the self-employed have become  obsolete and are being replaced by other options.
• Coverage of new Personal Auto Policy (PAP). The Insurance Services Office (ISO) has released  a new version of the Personal Auto Policy. The  2018 PAP is discussed in Chapter 20. The policy was revised to address car sharing and ride  sharing (for example, Uber and Lyft) exposures. Additional changes in the 2018 PAP are also discussed.
• Cyber insurance. Computer hackers have been  successful in accessing the credit card records  and other personal information of millions of  individuals. Cyber security remains an important financial concern for business firms and public entities because of data breaches and  malware. Chapter 25 provides an updated treatment of cyber property insurance. Chapter 26  provides an updated treatment of cyber liability insurance.

IDENTIFICATION AND TREATMENT OF MAJOR RISKS
A primary objective of the text is to identify major  risks in our economy and the various techniques for  treating risk. Since the last edition of the text appeared,  several tragedies have occurred that vividly show the  deadly presence of risk in our society. In August 2017,  Hurricane Harvey caused $125 billion in damage,  record rainfall and catastrophic flooding in Texas and  Louisiana, and 107 confirmed deaths. Harvey was the  second most-costly hurricane in the United States since  1900. Shortly thereafter, in October 2017, a deranged  gunman rained gunfire on people attending an outdoor concert across the street from the Mandalay  Bay Resort and Casino in Las Vegas, Nevada, killing  58 people and wounding and injuring more than 800  people from gunfire and panic.

In addition to catastrophic tragedies at the  national level, the media routinely report events that  clearly show the destructive presence of risk at the  local level. Examples abound. An employee in a liquor store is shot and killed by a customer seeking cash and  alcohol; a house fire leaves a family homeless; a tor nado destroys a large part of a small town; a drunk  driver fails to stop at a red light and smashes into  another motorist; a plant explosion kills two people  and injures several employees; and a blinding snow storm and ice-packed interstate highway cause a chainlike accident and collision damage to 10 cars. As a  result, victims and families experience catastrophic  financial losses, intense emotional pain and suffering, serious physical and mental injuries, and often death. To say that we live in a risky and very dangerous environment is an enormous understatement.

OVERVIEW OF THE 14TH EDITION
The 14th edition of this text discusses the aforementioned risks and other insurance issues, as well. The  text is designed for a beginning undergraduate course  in risk management and insurance with no prerequisites. Topics discussed include basic principles in risk  management and insurance, introductory and  advanced topics in traditional risk management,  newer enterprise risk management concepts, functional and financial operations of insurers, legal principles, life and health insurance, property and liability  insurance, employee benefits, Social Security, and  social insurance programs. In addition, the 14th edition is a user-friendly text for students who can apply  basic concepts immediately to their own personal risk management and insurance programs.