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# For similar cars and drivers, automobile insurance for

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Director
Joined: 10 Feb 2006
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For similar cars and drivers, automobile insurance for [#permalink]

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19 Jun 2008, 17:34
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Difficulty:

(N/A)

Question Stats:

50% (01:27) correct 50% (00:00) wrong based on 6 sessions

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For similar cars and drivers, automobile insurance for collision damage ha
always cost more in Greatport than in Faimont. Police studies, however,
show that cars owned by Greatport residents are, on average, slightly less
likely to be involved in a collision than cars in Fairmont. Clearly, therefore
insurance companies are making a greater profit on collision-damage
insurance in Greatport than in Fairmont.
Which of the following is an assumption on which the argument depends?
A. Repairing typical collision damage does not cost more in Greatport
than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to
report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-
damage insurance rates.
E. The insurance companies were already aware of the difference in the
like lihood of collisions before the publication of the police reports.

here's what the stimulus states

greatpoint has an insurance of 10% for collision
fairmount has an insurance of 5 % for collision
greatpoint has 100 cars - supposedly insurance makes 10
fairmount has 100 cars - suppsendly insurance makes 5
greatpoint has 5 accidents cost $100.00 / car = 500 fairmont has 10 accident cost$100.00 / car = 1000

the only way we can state that insurance is making profit on greatpoint is when its costing less to fix greatpoint. so
i would go with A.
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Director
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19 Jun 2008, 18:22
the only way we can state that insurance is making profit on greatpoint is when its costing less to fix greatpoint. so
i would go with A.

Another classic CR error. You are ignoring other alternative explanation. If it cost same of fix collision damage at "Greatpoint" as well as "Faimont" then also insurance companies will make more profit.

Senior Manager
Joined: 07 Feb 2008
Posts: 315
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20 Jun 2008, 02:57
For similar cars and drivers, automobile insurance for collision damage ha
always cost more in Greatport than in Faimont. Police studies, however,
show that cars owned by Greatport residents are, on average, slightly less
likely to be involved in a collision than cars in Fairmont. Clearly, therefore
insurance companies are making a greater profit on collision-damage
insurance in Greatport than in Fairmont.
Which of the following is an assumption on which the argument depends?
A. Repairing typical collision damage does not cost more in Greatport
than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to
report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-
damage insurance rates.
E. The insurance companies were already aware of the difference in the
like lihood of collisions before the publication of the police reports.

here's what the stimulus states

greatpoint has an insurance of 10% for collision
fairmount has an insurance of 5 % for collision
greatpoint has 100 cars - supposedly insurance makes 10
fairmount has 100 cars - suppsendly insurance makes 5
greatpoint has 5 accidents cost $100.00 / car = 500 fairmont has 10 accident cost$100.00 / car = 1000

the only way we can state that insurance is making profit on greatpoint is when its costing less to fix greatpoint. so
i would go with A.

I have to disagree. I go with B here.

If there are more motorists in Greatport than in Fairmont then more motorists = higher chance of a collision.
CEO
Joined: 17 May 2007
Posts: 2989
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Kudos [?]: 554 [0], given: 210

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20 Jun 2008, 03:09
I agree with A. Insurance payout depend on probability of collision as well as average costs of repair. So if repair costs were higher in the high insurance premium city then the profit margins might not be higher.
Senior Manager
Joined: 16 Aug 2004
Posts: 327
Location: India
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20 Jun 2008, 04:04
Right I also go for answer choice A. Choice B includes "motorist" indicating that drivers of other vehicles might form this set. C at best strengthens the argument. The rest of the answers (D & E) are not relevant.
VP
Joined: 18 May 2008
Posts: 1287
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20 Jun 2008, 04:20
For similar cars and drivers, automobile insurance for collision damage ha
always cost more in Greatport than in Faimont. Police studies, however,
show that cars owned by Greatport residents are, on average, slightly less
likely to be involved in a collision than cars in Fairmont.Clearly, therefore
insurance companies are making a greater profit on collision-damage
insurance in Greatport than in Fairmont.
Which of the following is an assumption on which the argument depends?
A. Repairing typical collision damage does not cost more in Greatport
than in Fairmont. if this wasnt true then it would have affected the profit so best answer
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to
report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-
damage insurance rates.
E. The insurance companies were already aware of the difference in the
like lihood of collisions before the publication of the police reports.

here's what the stimulus states

greatpoint has an insurance of 10% for collision
fairmount has an insurance of 5 % for collision
greatpoint has 100 cars - supposedly insurance makes 10
fairmount has 100 cars - suppsendly insurance makes 5
greatpoint has 5 accidents cost $100.00 / car = 500 fairmont has 10 accident cost$100.00 / car = 1000

the only way we can state that insurance is making profit on greatpoint is when its costing less to fix greatpoint. so
i would go with A.
Re: cr - insurance.   [#permalink] 20 Jun 2008, 04:20
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