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IAI Actuarial Core Principles · Business Economics · Supply-side policies and their impact on businesses

Which of the following is a typical example of an interventionist supply-side measure that would be of particular benefit to a life insurer's business?

Government funding of a national digital identity and data system is the interventionist measure, since the state directly provides infrastructure that lowers customer verification costs for insurers. Tax cuts, privatisation, removal of price controls and curbs on union power are market-based supply-side policies.

  1. AGovernment funding of a national digital identity and data system that lowers customer verification costsCorrect
  2. BA cut in the corporate tax rate to encourage retained profit
  3. CPrivatisation of a state-owned bank
  4. DRemoval of price controls on medicines
  5. A reduction in trade union powers

Explanation

Publicly funded digital identity infrastructure is direct state provision that lowers firms' transaction costs, so it is interventionist. The other options are market-based measures: tax cuts, privatisation, deregulation and labour market reform work through incentives and competition rather than direct state provision.

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