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Home insurance premiums are typically set after an appraiser

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Home insurance premiums are typically set after an appraiser [#permalink]

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New post 25 May 2009, 11:01
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Home insurance premiums are typically set after an appraiser assigns an official assessed value. Reassessments should be frequent in order to remove distortions that arise when property value changes at differential rates. In actual fact, however, properties are reassessed only when they stand to benefit the insurance company. In other words, a reassessment takes place when the most likely outcome is in increase in insurance premiums to the homeowner.

Which of the following, if true, describes a situation in which a reassessment should occur but in unlikely to do so?

A. Property values have risen sharply and uniformly.
B. Property values have risen everywhere – some very sharply, some moderately.
C. Property values have on the whole risen sharply; yet some have dropped slightly.
D. Property values have on the whole dropped significantly; yet some have risen slightly.
E. Property values have dropped significantly and uniformly.
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Kudos [?]: 161 [0], given: 2

Manager
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Re: Home insurance premiums [#permalink]

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New post 25 May 2009, 11:52
mbaMission wrote:
Home insurance premiums are typically set after an appraiser assigns an official assessed value. Reassessments should be frequent in order to remove distortions that arise when property value changes at differential rates. In actual fact, however, properties are reassessed only when they stand to benefit the insurance company. In other words, a reassessment takes place when the most likely outcome is in increase in insurance premiums to the homeowner.

Which of the following, if true, describes a situation in which a reassessment should occur but in unlikely to do so?

A. Property values have risen sharply and uniformly.
B. Property values have risen everywhere – some very sharply, some moderately.
C. Property values have on the whole risen sharply; yet some have dropped slightly.
D. Property values have on the whole dropped significantly; yet some have risen slightly.
E. Property values have dropped significantly and uniformly.


I would guess (E), the info doesn't specifically articulate this, but it seems that increased premiums would be a result of increased home value, and the reverse would be true as well. So if the insurance companies reassessed when values decrease, then they wouldn't be able to charge as much. So (E) sounds like the MOST unlikely situation where reassessments would be made by the companies.

Kudos [?]: 29 [0], given: 3

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Re: Home insurance premiums [#permalink]

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New post 26 May 2009, 05:21
mbaMission wrote:
Home insurance premiums are typically set after an appraiser assigns an official assessed value. Reassessments should be frequent in order to remove distortions that arise when property value changes at differential rates. In actual fact, however, properties are reassessed only when they stand to benefit the insurance company. In other words, a reassessment takes place when the most likely outcome is in increase in insurance premiums to the homeowner.

Which of the following, if true, describes a situation in which a reassessment should occur but in unlikely to do so?

A. Property values have risen sharply and uniformly.
B. Property values have risen everywhere – some very sharply, some moderately.
C. Property values have on the whole risen sharply; yet some have dropped slightly.
D. Property values have on the whole dropped significantly; yet some have risen slightly.
E. Property values have dropped significantly and uniformly.


IMO D should be the answer. reassessment should happen property value changes at differential rates. so A and E are out, also reassessment should also occur in favour of home owners (when the prices fall significantly ), but at the same time few property value rates have also risen slightly

Kudos [?]: 5 [0], given: 1

Manager
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Joined: 01 Aug 2008
Posts: 117

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Re: Home insurance premiums [#permalink]

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New post 27 May 2009, 01:22
rahulg83 wrote:
mbaMission wrote:
Home insurance premiums are typically set after an appraiser assigns an official assessed value. Reassessments should be frequent in order to remove distortions that arise when property value changes at differential rates. In actual fact, however, properties are reassessed only when they stand to benefit the insurance company. In other words, a reassessment takes place when the most likely outcome is in increase in insurance premiums to the homeowner.

Which of the following, if true, describes a situation in which a reassessment should occur but in unlikely to do so?

A. Property values have risen sharply and uniformly.
B. Property values have risen everywhere – some very sharply, some moderately.
C. Property values have on the whole risen sharply; yet some have dropped slightly.
D. Property values have on the whole dropped significantly; yet some have risen slightly.
E. Property values have dropped significantly and uniformly.


IMO D should be the answer. reassessment should happen property value changes at differential rates. so A and E are out, also reassessment should also occur in favour of home owners (when the prices fall significantly ), but at the same time few property value rates have also risen slightly



OA: D
_________________

==============================================
Do not answer without sharing the reasoning behind ur choice
-----------------------------------------------------------
Working on my weakness : GMAT Verbal
------------------------------------------------------------
Ask:
Why, What, How, When, Where, Who
==============================================

Kudos [?]: 161 [0], given: 2

Re: Home insurance premiums   [#permalink] 27 May 2009, 01:22
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