Which of the following statements about the insurance industry as a source of investment funds is (are)true?
I.These funds result in a lower cost of capital than would exist in the absence of insurance.
II.These funds tend to promote economic growth and full employment.
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

I is true because insurance companies collect premiums from policyholders and invest those funds in stocks, bonds, and other securities. By investing these funds, they are able to earn returns that help offset the cost of claims or pay policyholders dividends, which ultimately reduce the cost of capital for businesses and individuals.

II is also true because insurance companies, through their investments, provide funding for businesses and infrastructure projects, which can stimulate economic growth and create jobs. Additionally, insurance products such as annuities and life insurance provide individuals with financial security, which can in turn promote consumer spending and support the overall economy.

Which of the Following Statements About the Insurance Industry as a Source