Question

If interest rates fall, what would be the impact on the premium rates assuming all other same?

a.

Premium rates would also fall

b.

Premium rates would rise

c.

Premium rates would not be affected

d.

None of the above

Answer: (b).Premium rates would rise Explanation:Life insurers invest premiums in the bond market and when interest rates fall, the amount available to pay benefits declines - premiums rise to compensate.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. If interest rates fall, what would be the impact on the premium rates assuming all other same?

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What factors influence interest rate risk?

Q. How are interest rate models utilized in insurance?

Q. What are some of the factors considered for deciding interest rate assumptions?

Q. How does the determination of interest rates vary with the type of insurance product selected?

Q. What does interest rate refer to?

Q. Why is interest rate assumption particularly important for certain types of insurance products?

Q. How many steps are typically involved in the assumption setting process?

Q. What are the main factors considered in calculating life insurance premiums?

Q. What is the purpose of applying stochastic interest rate approaches for hedging purposes?

Q. Why might traditional immunization methodology not be suitable for measuring interest rate risk with innovative insurance products?

Q. What does convexity measure in the context of assets and liabilities?

Q. How is duration defined in the context of assets and liabilities?

Q. What is the purpose of immunization techniques in managing traditional life insurance products?

Q. What is the consequence of higher leverage for insurance companies?

Q. How does rising interest rates affect insurers whose duration of assets exceeds that of their liabilities?

Q. What measures do insurers take to mitigate interest rate risk?

Q. How can a prolonged low interest rate environment impact insurance companies?

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

Q. How do insurance companies mitigate the risk of interest rate fluctuations affecting their investments and liabilities?

Q. In response to low interest rates, what strategy do insurance companies often employ to attract buyers?

Recommended Subjects

Are you eager to expand your knowledge beyond IC 92 Actuarial Aspects of Product Development? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!