Alberta General Insurance Level 1 Practice Exam

What secondary function of insurance contributes to the economy?

1. Selling policies

2. Investments like bonds and stock

3. Claim settlements

4. Policy renewals

The correct answer is: Investments like bonds and stock

Investments like bonds and stock are considered a secondary function of insurance because insurance companies invest their premiums in these assets, which in turn, contributes to the economy. This is because these companies are able to collect large amounts of money from premiums and then they invest it in stocks and other financial instruments that help stimulate the economy. Selling policies primarily generates revenue for the insurance company, claim settlements are a result of the primary function of insurance and do not directly contribute to the economy, and policy renewals are just continuation of the primary function and do not have a direct impact on the economy. Thus, option B is the most accurate and relevant choice in terms of how insurance contributes to the economy.