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Insurance Company X is considering issuing a new policy to

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Insurance Company X is considering issuing a new policy to [#permalink] New post 06 Oct 2010, 05:10
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Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X is concerned that the income from the policies would not be sufficient to pay for the claims that would be made.

Which of the following strategies would be most likely to minimize Company X's losses on the policies?

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years
B.Insuring only those individuals who did not suffer any serious diseases as children
C.Including a greater number of services in the policy than are included in other policies of lower cost
D.Insuring only those individuals who were rejected by other companies for similar policies
E.Insuring only those individuals who are wealthy enough to pay for the medical services
[Reveal] Spoiler: OA
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 06 Oct 2010, 05:56
only A

All other answer choices does not minimize the loss. Conclusion: X is concerned that the income from the policies would not be sufficient to pay for the claims.
A=> right it pointing out how they can minimize loss
B=>individuals who did not suffer any serious diseases as children can still suffer in the old age
C=>this will have the reverse effect
D=>this could also have reverse effect
E=>still can not cover the cost

pzazz12 wrote:
Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X is concerned that the income from the policies would not be sufficient to pay for the claims that would be made.

Which of the following strategies would be most likely to minimize Company X's losses on the policies?

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years
B.Insuring only those individuals who did not suffer any serious diseases as children
C.Including a greater number of services in the policy than are included in other policies of lower cost
D.Insuring only those individuals who were rejected by other companies for similar policies
E.Insuring only those individuals who are wealthy enough to pay for the medical services

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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 06 Oct 2010, 07:13
A for me.

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years --> This helps them get the premimum for a long time without having to pay for the claims.
B.Insuring only those individuals who did not suffer any serious diseases as children --> This does not gurantee in old age these folks wont have any problems.
C.Including a greater number of services in the policy than are included in other policies of lower cost --> This will make it more uneconomical.
D.Insuring only those individuals who were rejected by other companies for similar policies --> This will make it more uneconomical.
E.Insuring only those individuals who are wealthy enough to pay for the medical services --> If these guys take insurance they would claim the bills and their being simply rich does not help the company.
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 06 Oct 2010, 07:15
pzazz12 wrote:
Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X is concerned that the income from the policies would not be sufficient to pay for the claims that would be made.

Which of the following strategies would be most likely to minimize Company X's losses on the policies?

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years
B.Insuring only those individuals who did not suffer any serious diseases as children
C.Including a greater number of services in the policy than are included in other policies of lower cost
D.Insuring only those individuals who were rejected by other companies for similar policies
E.Insuring only those individuals who are wealthy enough to pay for the medical services

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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 18 May 2011, 02:56
clean A here giving reasons for accumulating funds.
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 21 Jul 2011, 04:28
pzazz12 wrote:
Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X is concerned that the income from the policies would not be sufficient to pay for the claims that would be made.

Which of the following strategies would be most likely to minimize Company X's losses on the policies?

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years
B.Insuring only those individuals who did not suffer any serious diseases as children
C.Including a greater number of services in the policy than are included in other policies of lower cost
D.Insuring only those individuals who were rejected by other companies for similar policies
E.Insuring only those individuals who are wealthy enough to pay for the medical services


SC followup question: In the 1st sentence of the Stimulus, is it correct to say "considering issuing" ? Isn't it more appropriate to say "considering to issue" ?
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 21 Jul 2011, 05:44
abhicoolmax wrote:
pzazz12 wrote:
Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X is concerned that the income from the policies would not be sufficient to pay for the claims that would be made.

Which of the following strategies would be most likely to minimize Company X's losses on the policies?

A.Attracting middle-aged customers unlikely to submit claims for benefits for many years
B.Insuring only those individuals who did not suffer any serious diseases as children
C.Including a greater number of services in the policy than are included in other policies of lower cost
D.Insuring only those individuals who were rejected by other companies for similar policies
E.Insuring only those individuals who are wealthy enough to pay for the medical services


SC followup question: In the 1st sentence of the Stimulus, is it correct to say "considering issuing" ? Isn't it more appropriate to say "considering to issue" ?


Considering to X is the wrong idiom I believe.
Considering X is the right form.
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 21 Jul 2011, 05:52
A is most likely the correct answer:

A) allows the company to attract middle aged customers who won't submit claims for years allowing the insurance company to collect years of premiums before they'll likely have to pay coverage for a claim. Correct answer.

B) The insurance policy is discussing coverage for elderly people, not children. Sure, there may be a correlation between getting sick as a kid or getting older, but the stimulus provides no support for it. Let's stick to the stimulus and not assume anything.

C) Would not alleviate the concerns of the company. In fact, the concerns would be magnified if they offered even MORE services under this policy at a low cost. This is an incorrect answer

D) is tricky. It would allow the company to attract more customers which is what they want to do. But the company is concerned about providing the low cost coverage for people likely to get sick (the elderly). Answer choice D allows the company to attract customers, but does nothing to alleviate the potential cost burden. Contrast this answer choice with answer choice A) which allows both a method of attracting customers AND alleviating costs. As between the two, A is the better answer choice.

E) deals with wealth, but is not a great answer choice. Insurance covers the cost of medical services regardless of the income of the patients. Though the company may attract a wealthier clientele with E), E) still does nothing to help attract a broad base of customers (in fact, it suggests only attracting a minority of people) and it does nothing to alleviate the cost that the insurace company would have to pay in potential claims. Another way to think of this is: Old people will get sick whether they are rich or not. Being rich has no bearing on the company's liability under the insurance policy - at least not in this particular stimulus. Thus, E is incorrect.
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 22 Jul 2011, 09:17
+1 for A
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Re: Insurance Company X is considering issuing a new policy.. [#permalink] New post 20 Sep 2012, 22:29
JohnGaltMBA wrote:
A is most likely the correct answer:

A) allows the company to attract middle aged customers who won't submit claims for years allowing the insurance company to collect years of premiums before they'll likely have to pay coverage for a claim. Correct answer.

B) The insurance policy is discussing coverage for elderly people, not children. Sure, there may be a correlation between getting sick as a kid or getting older, but the stimulus provides no support for it. Let's stick to the stimulus and not assume anything.

C) Would not alleviate the concerns of the company. In fact, the concerns would be magnified if they offered even MORE services under this policy at a low cost. This is an incorrect answer

D) is tricky. It would allow the company to attract more customers which is what they want to do. But the company is concerned about providing the low cost coverage for people likely to get sick (the elderly). Answer choice D allows the company to attract customers, but does nothing to alleviate the potential cost burden. Contrast this answer choice with answer choice A) which allows both a method of attracting customers AND alleviating costs. As between the two, A is the better answer choice.

E) deals with wealth, but is not a great answer choice. Insurance covers the cost of medical services regardless of the income of the patients. Though the company may attract a wealthier clientele with E), E) still does nothing to help attract a broad base of customers (in fact, it suggests only attracting a minority of people) and it does nothing to alleviate the cost that the insurace company would have to pay in potential claims. Another way to think of this is: Old people will get sick whether they are rich or not. Being rich has no bearing on the company's liability under the insurance policy - at least not in this particular stimulus. Thus, E is incorrect.



But isn't the argument talking about the elderly people insurance policies so in that case how can A be right? Please explain
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Re: Insurance Company X is considering issuing a new policy to [#permalink] New post 23 Sep 2012, 02:08
+1 A rest all are not helping the strategy.
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Re: Insurance Company X is considering issuing a new policy to [#permalink] New post 04 Sep 2013, 18:58
I have a question - since this is an "Evaluate the Argument" type of question - if we choose A, aren't we inferring a little too much? Meaning - this policy is for elderly people and the answer suggests that we attract middle-aged customers. Isn't that steering us in a different direction.

P.S: I know that A is the correct answer according to the OG, but still can't seem to reason it out.
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Re: Insurance Company X is considering issuing a new policy to [#permalink] New post 17 Oct 2013, 06:54
russ9 wrote:
I have a question - since this is an "Evaluate the Argument" type of question - if we choose A, aren't we inferring a little too much? Meaning - this policy is for elderly people and the answer suggests that we attract middle-aged customers. Isn't that steering us in a different direction.

P.S: I know that A is the correct answer according to the OG, but still can't seem to reason it out.


We will not be going too far in inferring considering we have to find the best option from these 5 choices only. You would agree that B,C,D are clearly out. You may come close to E thinking that wealthy people will be able to pay but that also does not guarantee it will happen, so Co.'s question still remains, how to reduce claim losses. Only way is suggested by choice "A." This group is less likely to claim for "elderly disease" for quite sometimes and if the company widens its approach to these people, company's purpose is solved.
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Re: Insurance Company X is considering issuing a new policy to [#permalink] New post 11 Jul 2014, 23:05
The reason we chose A is :

If Company X attracts middle aged people who will not be claiming any amount in the near future,X could use the premiums that these Middle aged people had paid. In this way this excess amount can be used to settle claims made by the elderly people covered in X's new policy.

Is my understanding right?
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Re: Insurance Company X is considering issuing a new policy to   [#permalink] 11 Jul 2014, 23:05
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