Introduction to Risk Management and Insurance

Series
Prentice Hall
Author
Mark S. Dorfman / David A. Cather  
Publisher
Pearson
Cover
Softcover
Edition
10
Language
English
Total pages
504
Pub.-date
August 2012
ISBN13
9780131394124
ISBN
0131394126
Related Titles


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9780131394124
Introduction to Risk Management and Insurance
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Description

For upper level undergraduate/graduate courses in Principles of Insurance and Risk Management.

Drawing from the author's extensive teaching experience, this book introduces students to basic insurance concepts from the consumer's point of view and equips them with the tools to make intelligent, informed insurance purchasing decisions.


The tenth edition has been reorganized and fully updated to highlight the increased importance of risk management and insurance in business and society.  In particular, the tenth edition refocuses its attention on corporate risk management, reflecting its growing importance in today's economy.

Features

For upper level undergraduate/graduate courses in Principles of Insurance and Risk Management.

 

Drawing from the author's extensive teaching experience, this book introduces students to basic insurance concepts from the consumer's point of view and equips them with the tools to make intelligent, informed insurance purchasing decisions.


The tenth edition has been reorganized and fully updated to highlight the increased importance of risk management and insurance in business and society.  In particular, the tenth edition refocuses its attention on corporate risk management, reflecting its growing importance in today's economy.

Comprehensive Coverage. Introduction to Risk Management provides solid coverage of the most critical concepts and issues. The book's chapters are divided into six sections covering basic principles and terminology; operational and regulatory background for the insurance industry; homeowners and auto policies most likely to be purchased by readers; professional financial planning, including life and health insurance topics; advanced risk management topics and commercial property and liability insurance; and employee benefits, Social Security, unemployment insurance, and workers' comp.

 

Integration Across the Curriculum. Concern with potential losses-the focal point of the undergraduate risk management curriculum-is shared to some extent by all major divisions of business studies. The book's complete coverage includes references to economics, mathematics, law, history, politics, medicine, and more.

 

OTHER POINTS OF DISTINCTION

 

Broad Appeal. Introduction to Risk Management, offers valuable insight for every student-whether they want to simply understand how to buy a personal auto policy, gain risk management knowledge to help them in management, or pursue a career in insurance. The book's thorough coverage equips readers with the insight to make informed buying decisions as well as a solid foundation to build upon in advanced risk management courses.

 

Critical Thinking and Moral Reasoning. Helping students sharpen their critical-thinking skills, the book provides many opportunities for logical analysis. It poses questions, such as, “What distinguishes socially acceptable from unacceptable characteristics in setting insurance rates? Could a capitalistic society function without a private insurance system? Should health insurance be provided on a public or private basis? Who should decide what type of treatments should be reimbursed under health insurance coverage? Should the insurance transaction be regulated at the federal or at the state level? How should an insurance agent or broker act when a conflict of interest arises with a client?”

  

Communication Emphasis: The book equips students with invaluable insight to help them improve communication skills and avoid common pitfalls. Its thorough discussion of actual court cases helps readers see that language must be used precisely to avoid unintended results. It also effectively illustrates that the same words may mean different things to different people; that courts are often needed to interpret language when it is not used precisely; and that using ambiguous language can be very expensive.

 

Understanding Human Behavior. Emphasizing that insurance is not all stats and terminology, the book includes intriguing discussions of the role of human behavior in insurance transactions. It challenges readers to look at the psychological issues involved in risk management as it asks pointed questions: “Why are some exposures to loss insured while others are not? What role does human behavior play in causing or preventing losses? How can society encourage people to save for retirement and adequately insure their lives?”

 

Learning Tools. Introduction to Risk Management includes many features to help readers stay focused. Chapters begin with Learning Objectives and end with self-test reviews and questions that ensure students fully comprehend chapter material and are well prepared for exams. Discussion questions and Internet Research Assignments give students further practice putting concepts into real-world contexts. In addition, boldfaced type alerts readers to key vocabulary, while shaded boxes spotlight important material like insurance policy language and judicial decisions.

 

NEW TO THE TENTH EDITION


The book starts with a new five-chapter section on the risk management process, with each chapter focused on a key step in the risk management process.

  • Chapter 1 introduces insurance, the risk management process, and the concept of Enterprise Risk Management (ERM). It defines key terms used throughout the book and identifies factors that have increased society's need for protection from risk.
  • Chapter 2 discusses the identification of loss exposures, a key first step in the risk management process. The chapter describes the variety of property, liability, and personnel risks (such as workers compensation and employee benefits programs) found in most firms. It also introduces the broad array of financial, operational, and strategic risks addressed in many ERM programs.
  • Chapter 3 discusses risk assessment, the next step in the risk management process. Using simple examples and no confusing symbols or equations, the chapter explains how to calculate key risk measures (e.g., variance, standard deviation), and shows how insurers and self-insurers reduce risk and more accurately forecast losses through risk pooling. It also differentiates between loss frequency and severity, showing how each affects a firm's average loss.
  • Chapter 4 describes the risk handling techniques available to address pure risks, including loss control (e.g., avoidance, prevention, and reduction), risk transfer (e.g., insurance, contractual transfer, and limited liability), and loss financing (e.g., insurance, self-insurance, and retention). It also examines the selection of risk handling techniques based on frequency, severity, and firm size.
  • Chapter 5 describes the risk handling techniques available to address speculative risks, with discussion focused on diversification and hedging techniques.  It introduces the concepts of covariance and correlation, and shows how ERM applies portfolio theory to aggregate and diversify the risks within a firm.

Five of the book's six sections have also been thoroughly updated:

  • Section 1 examines the risk management process, as described above. It examines the traditional model of risk management used by corporate risk managers for decades, as well as more recent interpretations used in ERM.
  • Section 2 consists of five chapters that describe insurance as a risk handling technique. This section maintains the unique balance of theory and practice found in the earlier editions of this book.  New material added to this section since the ninth edition includes updated material on insurer profitability, the shifts in market share in the insurance industry resulting from demutualization, and a discussion on the competitive structure of the insurance industry.
  • Section 3 focuses on personal insurance protection for property-liability loss exposures. New to this edition is a discussion of the latest versions of the Insurance Services Office (ISO) Personal Auto Policy and the ISO Homeowners 3 Special Insurance Policy, both found as appendices in the book.
  • Section 4 discusses personal life-health insurance and employee benefits.  This section begins with an introduction to personal financial planning, followed by discussions on life insurance, annuities, health insurance and employee benefits.  The tenth edition contains a completely updated discussion on health insurance.  New material added to this section includes a discussion on adverse selection in the individual health insurance markets, a revamped discussion of long term care insurance, the Patient Protection and Affordable Care Act, and a description of high deductible healthcare plans and health savings accounts.
  • Section 5 examines several types of social insurance available in the United States, including Social Security, unemployment insurance, and workers compensation programs.  An updated description of the benefits currently available from these programs is provided. 
  • Section 6 focuses on commercial property-liability insurance. This section includes updated discussions of workers compensation, property insurance, and liability insurance. New to this edition is a description of the latest version of the Insurance Services Office (ISO) Commercial General Liability policy, which is also provided as an appendix to this book.

New to this Edition

The book starts with a new five-chapter section on the risk management process, with each chapter focused on a key step in the risk management process.

  • Chapter 1 introduces insurance, the risk management process, and the concept of Enterprise Risk Management (ERM). It defines key terms used throughout the book and identifies factors that have increased society's need for protection from risk.
  • Chapter 2 discusses the identification of loss exposures, a key first step in the risk management process. The chapter describes the variety of property, liability, and personnel risks (such as workers compensation and employee benefits programs) found in most firms. It also introduces the broad array of financial, operational, and strategic risks addressed in many ERM programs.
  • Chapter 3 discusses risk assessment, the next step in the risk management process. Using simple examples and no confusing symbols or equations, the chapter explains how to calculate key risk measures (e.g., variance, standard deviation), and shows how insurers and self-insurers reduce risk and more accurately forecast losses through risk pooling. It also differentiates between loss frequency and severity, showing how each affects a firm's average loss.
  • Chapter 4 describes the risk handling techniques available to address pure risks, including loss control (e.g., avoidance, prevention, and reduction), risk transfer (e.g., insurance, contractual transfer, and limited liability), and loss financing (e.g., insurance, self-insurance, and retention). It also examines the selection of risk handling techniques based on frequency, severity, and firm size.
  • Chapter 5 describes the risk handling techniques available to address speculative risks, with discussion focused on diversification and hedging techniques.  It introduces the concepts of covariance and correlation, and shows how ERM applies portfolio theory to aggregate and diversify the risks within a firm.

Five of the book's six sections have also been thoroughly updated:

  • Section 1 examines the risk management process, as described above. It examines the traditional model of risk management used by corporate risk managers for decades, as well as more recent interpretations used in ERM.
  • Section 2 consists of five chapters that describe insurance as a risk handling technique. This section maintains the unique balance of theory and practice found in the earlier editions of this book.  New material added to this section since the ninth edition includes updated material on insurer profitability, the shifts in market share in the insurance industry resulting from demutualization, and a discussion on the competitive structure of the insurance industry.
  • Section 3 focuses on personal insurance protection for property-liability loss exposures. New to this edition is a discussion of the latest versions of the Insurance Services Office (ISO) Personal Auto Policy and the ISO Homeowners 3 Special Insurance Policy, both found as appendices in the book.
  • Section 4 discusses personal life-health insurance and employee benefits.  This section begins with an introduction to personal financial planning, followed by discussions on life insurance, annuities, health insurance and employee benefits.  The tenth edition contains a completely updated discussion on health insurance.  New material added to this section includes a discussion on adverse selection in the individual health insurance markets, a revamped discussion of long term care insurance, the Patient Protection and Affordable Care Act, and a description of high deductible healthcare plans and health savings accounts.
  • Section 5 examines several types of social insurance available in the United States, including Social Security, unemployment insurance, and workers compensation programs.  An updated description of the benefits currently available from these programs is provided. 
  • Section 6 focuses on commercial property-liability insurance. This section includes updated discussions of workers compensation, property insurance, and liability insurance. New to this edition is a description of the latest version of the Insurance Services Office (ISO) Commercial General Liability policy, which is also provided as an appendix to this book.

Table of Contents

Chapter 1: Introduction to Enterprise Risk Management and Insurance

Chapter 2: Risk Identification

Chapter 3: Risk Assessment and Pooling

Chapter 4: Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Chapter 5: Risk-Handling Techniques: Diversification and Hedging

Chapter 6: Fundamentals of Insurance

Chapter 7: Insurable Perils and Insuring Organizations

Chapter 8: Insurance Functions

Chapter 9: Insurance Markets: Economics and Issues

Chapter 10: Insurance Regulation

Chapter 11: Insurance Contracts

Chapter 12: The Personal Auto Policy

Chapter 13: Homeowners Insurance (HO)

Chapter 14: Professional Financial Planning

Chapter 15: Life Insurance Policies

Chapter 16: Standard Life Insurance contract Provisions and Options

Chapter 17: Annuities

Chapter 18: Health Insurance and Disability Income

Chapter 19: Employee Benefits

Chapter 20: Social Security

Chapter 21: Unemployment and Workers' Compensation Insurance

Chapter 22: Commercial Property Insurance

Chapter 23: Commercial Liability Insurance