Chat with AIExam 17: Insurance Companies and Pension Funds
Discuss how contractual financial institutions such as insurers and pension funds contribute to society.
(87) 
VerifiedContractual financial institutions promote order and prosperity by freeing their customers of certain worries about the future so that they can be happier, more productive, and more able to manage risk today. People who are anxious about the future are distracted from performing at their best, and are reluctant to take the risks on which economic growth and social progress depend. A society full of such people would not reach its full economic potential, and declining standards of living would provoke even more anxiety about the future. They provide useful services such as risk transference and/or transferring purchasing power through time. The regular premiums paid by clients provide a large amount of investable funds to the money and capital markets. This helps a society maximize its resources and generate better growth. Insurance can also reduce default risk on debts, another plus for society.
The sale of term life insurance has traditionally been the largest component of life insurance policies.
(85) VerifiedFalse
Pure risk and objective risk are both assumed by life insurance companies.
(72) VerifiedTrue
The primary motivation for demutualization of insurance companies has to been to reduce their regulatory burden.
(83) The law of large numbers as applied to insurance is an application of the diversification principle.
(98) Level premium whole life insurance builds a cash value for the policy holder because the insured overpays for the insurance coverage received.
(94) High premiums and tight underwriting standards are called a soft insurance market.
(69) A societal benefit of insurance companies is the transference of risk from insureds to professional insurance companies.
(73) Health insurance includes protection against the risk of large, unexpected medical expenses and/or the loss of income from illness or disability.
(72) Why does the government need to provide assistance with certain types of insurance such as flood insurance?
(79) Why should you be wary of counting on Social Security to fund your retirement?Is Social Security a good deal for the typical middle or upper income taxpayer?
(73) Objective risk is the deviation of actual losses from expected losses.
(79) "Fully contributory plans" are funded with employee contributions only.
(72) Cash‐flow underwriting means writing insurance at a discounted price in order to get
the premium dollars to invest at high interest rates.
(85) Social Security relies on current payroll tax receipts to pay current beneficiaries.
(77) Pure risk is a risk that results in either a loss or no loss, but does not result in a gain.
(69) Term life policies provide maximum life insurance dollar protection for consumers for a given amount of premium.
(77) 
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