It has to be B
the average cost to insurance companies of insuring drivers who drive less than the annual average is less than the average cost of insuring drivers who drive more than the annual average
Clearly this has to be true for the companies to make up for the losses from people who drive more than the annual average.
Can anyone explain?
In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit. Under the regulations, the rate any individual driver pays never depends on the actual distance driven by that driver each year. Therefore, Argonians who drive less than average partially subsidize the insurance of those who drive more than average
I am confused because the passage clearly states that the cost of insurance does not depend on the distance a driver drives, then why would people who drive less subsidize(means pay for) drivers who drive more.
Ok, lets assume insurance companies , think drivers who drive less are less risky so the cost of insurance is less,
1)how is this even possible when the argument clearly states
the rate any individual driver pays never depends on the actual distance driven by that driver each year
2)Even if drivers, who drive less, pay less insurance, how will that correlation reduce, subsidize the cost of insurance for people who drive more, here there is no mention of an average insurance to assume that if X pays 10 but drives less, Y pays 10 but drives more, hence X is susidizing Y.
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