LUCRETIAN, LLC
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Life Insurance, 15th Edition
Kenneth Black, Jr., Harold D. Skipper, Kenneth Black, III
ISBN: 978-0-9858765-1-7
Hardcover
827 pages
March 2015
Description
Table of Contents
The Authors
Past Authors
This 15th edition of Life Insurance is published in recognition of the 100th anniversary of this book's first edition. That edition was published in 1915 and authored by Dr. Solomon S. Huebner, founder of the Wharton School's insurance program and of the Chartered Life Underwriter certification program. It was pioneering for setting out both insurance principles and practices in a single, expansive treatise aimed explicitly at students of the business, whether they were students in the traditional collegiate sense or those undertaking professional development studies. This edition continues that legacy.
While the 14th edition represented a sweeping revision and was published not long ago, several factors compelled us to bring forward this edition. These included a desire to update several vitally important sections, such as the tax treatment of life insurance and the implementation of the Health Care and Affordability Act of 2010. We also discovered several portions of the 14th edition that needed clarification and others that benefited from a deeper treatment. We also corrected several errors identified by helpful readers.
The book's simple title, Life Insurance, should be understood in its broadest context to encompass insurance that (1) pays money on the death of an insured (i.e., mortality risks), (2) promises to pay while an insured is alive (i.e., longevity risks), and (3) promises payment or
services to insureds in the event of incapacity, disability, or loss of health (i.e., morbidity risks). The book continues to emphasize the economic and finance fundamentals that underpin life insurance theory and practice. The book is made more relevant to students and practitioners through its inclusion of the latest innovations in insurance products, their pricing, and their applications to individual, family, and business problem solving. Toward this end, the treatment of enterprise risk management has been deepened, in accordance with the increased understanding and emphasis occurring over the past two decades.
The material is presented from the viewpoints of the buyer, the advisor, the insurer, and the regulator. Forthright appraisals are offered to the various life insurer products, with suggestions for how they and the companies and producers that sell them can be evaluated. Further, while the historical emphasis on U.S. practice is retained, international practices and terminology are presented throughout. Finally, entire chapters are devoted to explanations of how life insurance products (1) fit within a personal financial planning context, (2) are taxed, (3) are relevant in estate planning, (4) assist in retirement planning, and (5) find beneficial application in many business situations. Each of these chapters reflects the latest applications, law, and tax treatment, while essential theoretical and practical background information provides a stable and lasting learning platform.
TABLE OF CONTENTS
Chapter 1: The Economics of Life Insurance
A Brief History of Life Insurance
The Language of Insurance
The Importance of Life Insurance
Life Insurance Markets
Economic Concepts of Life Insurance Consumption
Part I: Life Insurance Products
Chapter 2: An Overview of Life Insurance
Means of Dealing with the Financial Consequences of Death
Evaluation of Life Insurance as a Financial Instrument
Policies Sold by Life Insurance Companies
Requisites for Private Insurance
Introduction to Life Insurance Pricing
Chapter 3: Personal Life Insurance Products: I
Term Life Insurance
Universal Life Insurance
Variations of Universal Life Insurance
Chapter 4: Personal Life Insurance Products: II
Whole Life Insurance
Life Insurance on Multiple Lives
Specialized Life Insurance for Insureds with High Net Worth
Endowment Life Insurance
Summary of Attributes of Common Personal Life Insurance Policies
Appendix A4-1: Attributes of Term and Cash Value Life Insurance Policies
Chapter 5: Life Insurance Policy Provisions and Riders
Overview: Policy Content and Format
Life Insurance Policy Provisions
Common Life Insurance Policy Riders
Chapter 6: Retirement Products
The Nature of the Retirement Risk
Nature of Annuities
The Structure of Fixed Annuities
The Structure of Variable Annuities
Guaranteed Minimum Withdrawals
Substandard Mortality Annuities
Retirement Plans
Chapter 7: Health Insurance Products I: Medical Expense Insurance
The Health Care Environment
The Economics of Health Care
Overview of the Patient Protection and Affordable Care Act
Comprehensive Medical Insurance Coverage
Group Health Insurance
Individual Health Insurance
Major Government-related Health Programs in the United States
Chapter 8: Health Insurance Products II: Disability Income and Long Term Care
Disability Income Insurance
Long term Care Insurance
Part II: Life Insurance Company Operations
Chapter 9: Life Insurer Management
Life Insurance Providers
Corporate Management
A Functional Overview of Life Insurer Management
Financial and Actuarial Intermediation
A Short History of the Life Insurance Industry and Risk
Life Insurer Assets and Liabilities
How Life Insurers Make Money
Life Insurer Enterprise Risk Management
Chapter 10: Life Insurance Marketing
The Marketing Program
Life Insurance Product Development
Distribution Channels
Compensation in Marketing
Promotion
The International Dimensions of Distribution
The Future of Life Insurance Marketing
Chapter 11: Life Insurance Underwriting
Introduction
The Need for Underwriting
Guiding Principles in Underwriting
Factors Affecting Insurability
Sources of Information Concerning Life and Health Insurance Risks
Methods of Risk Classi!cation
Classifying Substandard Risks
Special Underwriting Practices
Reinsurance
Chapter 12: The Regulation and Taxation of Life Insurance Companies
Overview of Regulation
U.S. Federal Regulation of Life Insurers
U.S. State Regulation of Life Insurers
Issues in Group Supervision
Taxation of U.S. Life and Health Insurers
Chapter 13: Life Insurer Financial Reporting and Supervision
Financial Condition, Supervision, and Reporting
Life Insurer Accounting Conventions
Financial Reporting
SAP versus GAAP Treatment of Accounting Items
Financial Supervision 303
The Future of Financial Supervision and Reporting
Chapter 14: Life Insurer Financial Management
Capital and Risk Management
Economic Capital
Financial Risk Management
Capital Allocation
Risk-Adjusted Measurement of Firm-Level Financial Performance
Appendix
Chapter 15: Life Insurance Actuarial Fundamentals
Measurement of Risk in Life Insurance
Overview of Insurance Pricing
Net Premiums
Chapter 16: Life Insurance Actuarial Applications
Reserve Derivation
Cash Value Derivation
Derivation of Gross Premium Rate Structures
Surplus and Its Distribution
Part III: Life Insurance Due Care
Chapter 17: Life Insurance Advisor and Company Evaluation
The Life Insurance Purchase Decision
Evaluating Life Insurance Advisors
Evaluating Life Insurance Companies’ Financial Strength
Implications to Policyholders of Insurer Financial Di#culty
Chapter 18: Life Insurance Policy Evaluation I: Legal Aspects
Life Insurance and the Law of Contracts
The Insurance Policy as a Contract
Life Insurance and the Law of Agency
Market Conduct, Product Suitability, and Consumer Litigation
Creditor Rights in Life Insurance
Chapter 19: Life Insurance Policy Evaluation II: Performance Comparisons
Life Insurance Policy Illustrations
Assessing the Sustainability of Illustrated Policy Values
Using Illustrated Policy Values for Policy Performance Comparisons
Policy Reviews
Cost and Bene!t Disclosure
Life Insurance Replacement and its Regulation
Part IV: Life Insurance In Personal and Business Planning
Chapter 20: Personal Financial Planning
Wealth and the Life Cycle
Personal Financial Planning in a Risk Management Context
Personal Financial Planning Advice
The Personal Financial Planning Process
Determining the Total Personal Insurance Need
Chapter 21: Life and Health Insurance Product Taxation
Background
Life and Health Insurance Product Taxation Fundamentals
Federal Income Tax Law Affecting Policy Design and Operation
Life Insurance Policyowner Taxation
Annuity Policyowner Taxation
Health Insurance Policyowner Taxation
Chapter 22: Life Insurance in Estate Planning
The Estate Planning Process
United States Federal Transfer Tax Laws a$ecting Estate Planning
How Property Passes at Death
Life Insurance Analysis for Estate Planning
Life Insurance and the Generation-Skipping Transfer Tax
Chapter 23: Retirement Planning
The Uncertain Environment for Retirement Planning
Psychological Dimensions of Retirement Planning
The Retirement Planning Process
Retirement Planning Risk Management
Personal Savings through Nonquali!ed Annuities: An Extended Analysis
Personal Savings through Life Insurance: An Extended Analysis
Chapter 24: Life Insurance in Business Planning
Forms of Business Organizations
Tax Considerations in Business Applications of Life Insurance
Business Applications of Life Insurance
Glossary
Harold D. Skipper is Professor Emeritus of Risk Management and Insurance at Georgia State University. While at GSU, he chaired its Department of Risk Management and Insurance and held the C.V. Starr Chair of International Insurance until he retired in 2005. He is past President of ARIA, past Vice President of the IIS, and founder of the Asia-Pacific Risk and Insurance Association (APRIA). His bachelors degree is from Georgia State University and his masters and Ph.D. degrees are from the University of Pennsylvania where he studied as a Huebner Fellow.
He is author or coauthor of four books and dozens of articles and serves on the advisor boards of several international educational institutions. His major non-academic experience includes work with the United Nations Conference on Trade and Development in Geneva, the Paris-based Organization for Economic Cooperation and Development, the World Bank, the Geneva Association, the World Economic Forum, the U.S. Departments of Commerce and Justice, state and international insurance supervisors, the National Association of Insurance Commissioners, as well as several major corporations and law firms. Among his professional recognitions are ARIA’s Kulp-Wright Book Award (2009) for “Outstanding Original Contribution to the Literature of Risk and Insurance,” the IIS’s John S. Bickley Founder’s Award (2009); establishment (2005) of the Harold D. Skipper Award for Outstanding Risk and Insurance Research, presented annually at the APRIA conference; and membership (1995) in Phi Beta Delta, Honor Society for International Scholars.
Harold D. Skipper can be reached at haroldskipper@gmail.com.
Kenneth Black III is a graduate of the University of North Carolina and received his Juris Doctorate from the University of Georgia School of Law. He has worked across a wide spectrum of insurance, life insurance, and health insurance related activities serving both consumers and providers of financial services. These have included reinsurance brokerage at Lloyd’s of London, both practice and systems design in personal financial and estate planning, investment counseling, third party administration of health care plans, and strategic planning for financial services providers. He was a participant in a multi-disciplinary independent marketing group that designed, arranged reinsurance, and marketed the first substandard annuity for smokers in the United States.
He has provided consulting services to major life insurers, national and international life insurance agency operations, and law firms. As an adjunct instructor for many years, he taught courses in business law, risk and insurance principles, life insurance, financial planning, and financial institutions management in the Department of Risk Management and Insurance at Georgia State University. He has also served as guest lecturer in the department’s Munich Re International VisitingFellows Program. In 2013 he lectured at the Munich Risk and Insurance Center at Ludwig Maximillians University. He is a member of the American Risk and Insurance Association (ARIA) and the Asia-Pacific Risk and Insurance Association (APRIA). From 1993 to 2007, he organized and served as the founding President of a private life insurer affiliate of the former Fortis banking and insurance conglomerate.
Kenneth Black, III can be reached at kenblackiii@gmail.com.
Solomon S. Huebner, the sole author of this text until 1958, is often called the “father of insurance education” in the United States. He taught the first courses ever given in insurance and established (1913) and chaired the nation’s first academic department of insurance at the Wharton School, University of Pennsylvania. Although his Wharton doctoral thesis concerned foreign-trade aspects of marine insurance, he invited life insurance managers to lecture to his early Wharton students. He quickly realized the urgent need for uniformity, fairness, and honesty in the life insurance industry.
He authored several path breaking insurance textbooks, including the first edition of this volume, published in 1915. Since that time, succeeding editions have been in continuous use both at the university level and in professional programs. He invited Dr. Kenneth Black Jr. to join him as coauthor of this text in 1958. Dr. Huebner was active in both academic and professional circles, serving as President of the American Risk and Insurance Association (ARIA). He was made a Laureate of The Insurance Hall of Fame, International Insurance Society, Inc. in 1957, its inaugural year. Dr. Huebner retired from the University of Pennsylvania in 1953 and died in 1964.
Kenneth Black, Jr. was the founder of the Department of Risk Management and Insurance Department (1959), Regent’s Professor Emeritus, and Dean Emeritus of the Robinson College of Business at Georgia State University. He held the C.V. Starr Chair of International Insurance from its founding until 1993 and, in 1989, the Kenneth Black Jr. Chair of Insurance was founded in his honor. He held bachelors and masters degrees from the University of North Carolina, with a doctorate degree from the University of Pennsylvania where he studied as a Huebner Fellow.
Dr. Black was author or coauthor of 15 books and numerous articles and essays and served as the editor of the Journal of Financial Service Professionals for 42 years. He was also active in industry and government, serving as Vice Chairman of the President’s Commission on Railroad Retirement. He served as President of both ARIA and of the International Insurance Society (IIS). Among the many honors and awards Dr. Black received are: the John Newton Russell Memorial Award (1999) presented by the National Association of Life Underwriters; Laureate, The Insurance Hall of Fame, International Insurance Society, Inc. (1993); and the Solomon S. Huebner Gold Medal from the American College (1985); Dr. Black retired from the faculty at Georgia State University in 1992 and died in 2005.
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