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# Car Insurance

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VP
Joined: 25 Nov 2004
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03 Apr 2005, 22:02
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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.

The conclusion above would be properly drawn if it were also true that in Argonia

(A) the average accident insurance rate for all drivers 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 annual average
(C) the lower the age of a driver, the higher the insurance rate paid by that driver
(D) insurance company profits would rise substantially 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

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Director
Joined: 01 Feb 2003
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03 Apr 2005, 22:16
B should be it..

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VP
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03 Apr 2005, 22:27
Vithal wrote:
B should be it..

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GMAT Club Legend
Joined: 07 Jul 2004
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03 Apr 2005, 22:49
1) In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit.

2) Under the regulations, the rate any individual driver pays never depends on the actual distance driven by that driver each year.

3) 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 drivers rises whenever a substantial number of new drivers buy insurance
- Out of scope

(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
- If this is true, then the offset has to come ofrm the those who drive less than average

(C) the lower the age of a driver, the higher the insurance rate paid by that driver
- Out of scope

(D) insurance company profits would rise substantially if drivers were classified in terms of the actual number of miles they drive each year
- Not important. Does not attack the conclusion.

(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
- Contradicts conclsion that drivers who drive less than an average driver needs to pay more.

B it is.

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Director
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03 Apr 2005, 22:52
MA wrote:
Vithal wrote:
B should be it..

Say, driver A pays \$100 for insurance and travels 500 miles and driver B pays \$100, but travels 1000 miles. let us say the average distance travelled is 750 miles

Conclusion of the argument: Argonians who drive less than average partially subsidize the insurance of those who drive more than average

If A claims more in a year than B, then A will in no way subsidize the insurance of B - so, the assumption should be that A claims(cost to the insurance company) less than B..and this exactly what choice B states...

hence B

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Manager
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03 Apr 2005, 23:42
B.
_________________

Anyone who has never made a mistake has never tried anything new. -Albert Einstein.

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Senior Manager
Joined: 10 Nov 2004
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04 Apr 2005, 01:08
One more for B.

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VP
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04 Apr 2005, 07:38
Vithal wrote:
MA wrote:
Vithal wrote:
B should be it..

Say, driver A pays \$100 for insurance and travels 500 miles and driver B pays \$100, but travels 1000 miles. let us say the average distance travelled is 750 miles

Conclusion of the argument: Argonians who drive less than average partially subsidize the insurance of those who drive more than average

If A claims more in a year than B, then A will in no way subsidize the insurance of B - so, the assumption should be that A claims(cost to the insurance company) less than B..and this exactly what choice B states...
hence B

perfect.

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Director
Joined: 05 Jan 2005
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04 Apr 2005, 09:11
(B) as well.

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Manager
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04 Apr 2005, 09:17
B is my choice too.
_________________

The ability to focus attention on important things is a defining characteristic of intelligence.
--by Robert J. Shiller

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Director
Joined: 27 Dec 2004
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04 Apr 2005, 09:27
B....

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Director
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04 Apr 2005, 09:28
B....

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Senior Manager
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04 Apr 2005, 10:58
B is my choice

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GMAT Club Legend
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04 Apr 2005, 20:46
OA ?

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VP
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04 Apr 2005, 21:00
ywilfred wrote:
OA ?

you all r perfect. do you still need OA?

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GMAT Club Legend
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04 Apr 2005, 21:50
Just in case the OA comes up differently

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04 Apr 2005, 21:50
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