Question

Assume premiums on existing policies don’t change and policyholders keep existing policies in force. Ig scientist develop a drug that results in a dramatic increase in life expectancy, which of the following insurance companies likely will benefit the most?

A. An insurer that sell only auto insurance

B. An insurer that sell only annuities

C. An insurer that sell only homeowners insurance

D. An insurer that sell only life insurance

Answer 1

D.An insurer that sell only life insurance.

This is because the amount to be paid on death of the insured will be delayed due to an increase in life expectancy, the number of years of receiving annual premiums will increase.

Taking into factor the time value of money, the later you pay a lumpsum, the greater will be the benefit to the payer.

Here payers are insurance companies,which will be delaying their payments to nominees of insured upon death, since the life expectancy has increased.