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
Can somebody explain the answer pls?
I believe the answer is A
We are told that insurance is used to cover services required by the elderly and asked how can we minimize these payouts to treat these illnesses
A - If you recruit customers who cannot get these diseases that is one way to minimize losses
B - Children? Unfortunately several senior citizens are suffering from various diseases now despite the fact that they were healthy. So the disease in question is unlikely to be detected in children
C - Including a greater number of services is not relevant to the issue at hand
D - This would probably increase your losses since you'd be taken on those who are ill
E - It makes to difference if clients are wealthy enough to pay for medical services since they would already have insurance
Hope this helps. Let me know if you have any other questions.