Find all School-related info fast with the new School-Specific MBA Forum

It is currently 23 Oct 2014, 03:24

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Technically a given category of insurance policy is

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Intern
Intern
avatar
Joined: 01 Sep 2011
Posts: 1
Followers: 1

Kudos [?]: 0 [0], given: 0

Technically a given category of insurance policy is [#permalink] New post 06 Sep 2011, 21:44
00:00
A
B
C
D
E

Difficulty:

  45% (medium)

Question Stats:

61% (02:40) correct 39% (01:25) wrong based on 61 sessions
Technically a given category of insurance policy is underpriced if, over time, claims against it plus expenses associated with it exceed total income from premiums. But premium income can be invested and will then yield returns of its own. Therefore, an underpriced policy does not represent a net loss in every case.

The argument above is based on which of the following assumptions?

(A) No insurance policies are deliberately underpriced in order to attract customers to the insurance company offering such policies.
(B) A policy that represents a net loss to the insurance company is not an underpriced policy in every case.
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set.
(D) The income earned by investing premium income is the most important determinant of an insurance company’s profits.
(E) The claims against at least some underpriced policies do not require paying out all of the premium income from those policies as soon as it is earned.
[Reveal] Spoiler: OA
Director
Director
User avatar
Status:
Joined: 24 Jul 2011
Posts: 557
GMAT 1: 780 Q51 V48
GRE 1: 1540 Q800 V740
Followers: 64

Kudos [?]: 288 [0], given: 11

Re: CR- insurance policy [#permalink] New post 07 Sep 2011, 04:23
Clearly (E)

If the premium income is paid out as part of claims as soon as the premium is received, then the premium cannot be reinvested, which would undermine the conclusion.
_________________

GyanOne | http://www.GyanOne.com | +91 9899831738

Get a free detailed MBA profile evaluation

Top MBA Rankings and MBA Admissions blog


Image

Manager
Manager
avatar
Joined: 04 Jun 2011
Posts: 190
Followers: 0

Kudos [?]: 33 [0], given: 21

Re: CR- insurance policy [#permalink] New post 07 Sep 2011, 07:02
yup... was an easy one... E

syr: why do you think its debatable?
Manager
Manager
avatar
Joined: 27 Dec 2007
Posts: 75
Followers: 0

Kudos [?]: 14 [0], given: 1

Re: CR- insurance policy [#permalink] New post 07 Sep 2011, 11:27
E
Manager
Manager
avatar
Joined: 15 Nov 2010
Posts: 109
Followers: 4

Kudos [?]: 2 [0], given: 15

Re: CR- insurance policy [#permalink] New post 07 Sep 2011, 17:25
syr wrote:
Technically a given category of insurance policy is underpriced if, over time, claims against it plus expenses associated with it exceed total income from premiums. But premium income can be invested and will then yield returns of its own. Therefore, an underpriced policy does not represent a net loss in every case.

The argument above is based on which of the following assumptions?

(A) No insurance policies are deliberately underpriced in order to attract customers to the insurance company offering such policies.
(B) A policy that represents a net loss to the insurance company is not an underpriced policy in every case.
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set.
(D) The income earned by investing premium income is the most important determinant of an insurance company’s profits.
(E) The claims against at least some underpriced policies do not require paying out all of the premium income from those policies as soon as it is earned.


This was a tough one. Chose E because it connects the missing link between premium and under priced policy.
Intern
Intern
avatar
Joined: 20 Apr 2013
Posts: 16
Followers: 0

Kudos [?]: 6 [0], given: 1

Re: CR- insurance policy [#permalink] New post 03 May 2013, 10:30
GyanOne wrote:
Clearly (E)

If the premium income is paid out as part of claims as soon as the premium is received, then the premium cannot be reinvested, which would undermine the conclusion.


I could not understand why they have mentioned here "atleast"
Manager
Manager
avatar
Joined: 14 Dec 2012
Posts: 85
Location: United States
Followers: 0

Kudos [?]: 14 [0], given: 186

Re: Technically a given category of insurance policy is [#permalink] New post 03 May 2013, 10:36
i guess it is because we are talking of general set..." Therefore, an underpriced policy does not represent a net loss in every case." means in some cases,it could still result in a loss.. so in the answer options..we take "atleast some of the policies" ...to prove the point that there is no net loss in some cases at least..
Re: Technically a given category of insurance policy is   [#permalink] 03 May 2013, 10:36
    Similar topics Author Replies Last post
Similar
Topics:
Technically a given category of insurance policy is raghavs 3 09 Apr 2010, 23:02
Technically a given category of insurance policy is milind1979 7 29 Mar 2009, 17:26
Technically a given category of insurance policy is ayushi 11 26 Oct 2006, 11:52
Technically a given category of insurance policy is rahulraao 15 05 Oct 2005, 16:51
Technically a given category of insurance policy is Vithal 6 28 May 2005, 16:32
Display posts from previous: Sort by

Technically a given category of insurance policy is

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.