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In Argonia the average rate drivers pay for car acci- dent [#permalink]
07 Apr 2004, 06:26
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In Argonia the average rate drivers pay for car acci-
dent 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.
The conclusion above would be properly drawn if it
were also true that in Argonia
(A) the average accident insurance rate for all driv-
ers rises whenever a substantial number of
new drivers buy insurance
(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
(C) the lower the age of a driver, the higher the
insurance rate paid by that driver
(D) insurance company profits would rise substan-
tially if drivers were classified in terms of the
actual number of miles they drive each year
(E) drivers who have caused insurance companies
to pay costly claims generally pay insurance
rates that are equal to or lower than those
paid by other drivers
Can I say otherwise than B?
A does not solve the the paradox as to why those who drive less will subsidize for those who drive more when the premiums paid don't even depend on the distance driven
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