3-65 Which of the Following Did NOT Occur in the Life

question 82

Multiple Choice

3-65 Which of the following did NOT occur in the life insurance industry during the most recent financial crisis?

• A)Low equity values reduced asset-based fees on separate account assets.
• B)Losses were incurred on holding of commercial mortgage-backed securities and commercial loans.
• C)Asset-based fees declined on products such as variable annuities and pension fund assets that were tied to equity returns.
• D)Low interest rates and harsh economic conditions caused many policyholders to terminate or surrender their policies.
• E)Policy premium increased as more households and small businesses attempted to transfer risk to insurance companies.

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Definitions:

Profitable Use

The utilization of resources or assets in a manner that generates a significant positive return or profit.

Insufficient Capacity

A situation where a company does not have enough resources, such as manpower or machinery, to meet current or future production demands.

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount contributing to covering fixed costs and profit.

Variable Cost

A cost that changes in proportion to the level of output or activity in a business.