Final answer:
The statement regarding the break-even level being inversely proportional to the length of the tail lines in insurance, due to investment income contribution, is True. Longer tails allow for more investment income, reducing the premium needed for profitability. However, administrative costs and risk diversity are also important factors.
Step-by-step explanation:
In the context of insurance finance, the break-even level depends on the balance between premiums collected and claims paid, including the investment income generated from reserves. This is a function of how long, on average, the money is held before claims are paid out—a concept known as the 'tail' of the insurance line. A long-tail line would typically see premiums invested for a longer period before claims are settled, potentially allowing for more investment income to be generated, which could reduce the break-even level of that line of insurance.
Thus, the statement that the size of the break-even level is inversely proportional to the length of the tail lines, considering the investment income contribution, is True. Simply put, longer investment periods can lead to higher investment income, which, in turn, decreases the amount needed from premiums to reach break-even.
However, other factors like administrative costs and risk diversity also play a role in determining the insurance pricing and break-even points. The fundamental law of insurance dictates that premiums must cover claims, operational costs, and allow for the company's profits over time.