All of the following statements about life insurance company investments are true EXCEPT income from these investments reduces the cost of insurance. funds for these investments are derived primarily from premium income, investment earnings, and maturing investments that must be reinvested. a primary objective in making these investments is safety of principal. the majority of these investments are short-term investments.
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- 2. A. Define interest rate risk and reinvestment risk. B. Why do banks and life insurance companies/pension funds have different investment strategies and different tolerances to interest rate risk and reinvestment risk?explain what The decline of insurance as a risk-financing technique is and give examplesOne of the purposes that deductible are used in insurance policies is to O eliminate coverage for small claims. O place restrictions or limits on the insurer's promise to perform. provide broader coverage by increasing the number of perils covered. exclude perils that are not insurable.
- C. Term insurance O D. Annuity 11. Which of the following is NOT the features of investment-linked insurance? O A. The insured can choose their own level of protection and investment. B. The insured can vary the amount of the premium payments or coverage according to their changing financial circumstances. C. The insured can choose from wide variety of funds to invest in, depending on the level of risk that they comfortable with. O D. The tenures can be arranged to coincide with future events 12. Below are the features of the insurance policy under what types of life insurance? *It pertains to a risk management technique when acquiring a life insurance. *risk avoidancerisk retentionrisk transferanswer not givenMf3. (a) In relation to the underlying risk insured, explain why the use of funds differs for general insurance companies and life insurance companies. (b) Insurance companies manage funds as a part of the business of providing insurance. Describe another type of managed fund discussed in the course and explain how this differs from an insurance company. In your answer give an example of a source and use of funds for this managed fund.
- Underwriting risk results when the premiums generated on a given insurance product line are insufficient to cover all of the following EXCEPT: a.All of the above. b.Increased premiums. c.Increased expenses. d.Increased claims.The _______________ problem is when customers who are most likely to have a claim against an insurance company are those quickest to apply for an insurance contract. Group of answer choices a. Capital adequacy b. Default risk c. Adverse selection d. Mismatched maturityPolicy reserves for life insurers are the loss reserves equivalent of P&C insurers. True False
- Which of the following is correct about the effect of a deductible with respect to the price of an insurance policy? O A policy with a deductible will raise the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will lower the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will raise the premium. This will make the overall cost of insurance lower for policyholders who do not have a claim, but higher for those with high claims O A policy with a deductible will lower the premium. This will make the overal cost of insurance lower for policyholders who do not have a claim, but higher for those with high claimsIDENTIFICATION: What area of insurance companies is faced with therisk that estimates of loss reserves may not bereasonable?Identify and explain ONE key financial risk that an insurance company is exposed to. Explain the policies and procedures an insurance company put in place to mitigate the exposure of the said risk.