What is the public interest aspect of the cost index in the life insurance market?

In the life insurance market, the cost index plays a significant role in promoting price competition among insurance providers. The cost index essentially provides a benchmark for evaluating the cost of insurance products relative to their benefits and services. By establishing a standardized measure of costs, insurers are encouraged to be more competitive in their pricing strategies.

When insurers are aware of their position on the cost index compared to their competitors, they are likely to adjust their premiums and offerings to attract potential policyholders. This competitive environment ultimately benefits consumers, as it leads to more options at varied price points and can result in lower premiums for policyholders. Therefore, the public interest is served through increased consumer choice and better pricing, making insurance products more accessible to a wider audience.

While other options may have merits in different contexts, they do not directly relate to the public interest function of the cost index. For instance, higher bonuses for insurers or increased insurance sales may not necessarily align with the overarching goal of providing competitive pricing for consumers. Likewise, lower taxes on insurance policies pertains to fiscal policy rather than the direct effect of the cost index on market competition.