Question

What is disintermediation risk in the context of insurance?

a.

The risk of funds being withdrawn from low-yield investments to invest in higher-yield instruments

b.

The risk of funds being invested in low-yield instruments instead of higher-yield investments

c.

The risk of funds being reinvested in the same low-yield investment

d.

The risk of funds being invested in high-yield instruments without withdrawing from low-yield investments

Answer: (a).The risk of funds being withdrawn from low-yield investments to invest in higher-yield instruments Explanation:Disintermediation risk refers to the risk that policy owners will withdraw funds from low-yield investments, such as fixed accounts, to invest in higher-yielding instruments, potentially accelerating asset sales and leading to financial losses.

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Q. What is disintermediation risk in the context of insurance?

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