It is currently 24 Nov 2017, 00:48

### 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

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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Insurance Company X is considering issuing a new policy to

Author Message
Director
Joined: 12 Oct 2008
Posts: 538

Kudos [?]: 619 [0], given: 2

Insurance Company X is considering issuing a new policy to [#permalink]

### Show Tags

20 Jan 2009, 21:03
00:00

Difficulty:

(N/A)

Question Stats:

0% (00:00) correct 0% (00:00) wrong based on 3 sessions

### HideShow timer Statistics

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?

Kudos [?]: 619 [0], given: 2

Manager
Joined: 27 Aug 2008
Posts: 145

Kudos [?]: 50 [0], given: 0

### Show Tags

20 Jan 2009, 22:05
I think C makes sesnse.

Clearly, B, D & E are ruled out. Tough between A & C. But A can be ruled out based on the fact that the policy must cover elderly people. Targetting Mid aged segment isn't a correct policy.The idea should be to differentiate your product. This can be done by not reducing the cost but by increasing the quality & quantity of services provided by the product.

Kudos [?]: 50 [0], given: 0

Senior Manager
Joined: 02 Nov 2008
Posts: 276

Kudos [?]: 119 [0], given: 2

### Show Tags

20 Jan 2009, 22:21
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

Kudos [?]: 119 [0], given: 2

Director
Joined: 12 Oct 2008
Posts: 538

Kudos [?]: 619 [0], given: 2

### Show Tags

20 Jan 2009, 22:26
yes it is but why?

Kudos [?]: 619 [0], given: 2

Senior Manager
Joined: 02 Nov 2008
Posts: 276

Kudos [?]: 119 [0], given: 2

### Show Tags

20 Jan 2009, 22:32
chicagocubsrule 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

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.

Kudos [?]: 119 [0], given: 2

Forum Moderator
Status: mission completed!
Joined: 02 Jul 2009
Posts: 1391

Kudos [?]: 966 [0], given: 621

GPA: 3.77

### Show Tags

17 May 2010, 04:28
The question is from OG -11th.

This is one of the examples of strange GMAT logic in the gmatland.

GMAT says that correct answer choice is A, since middle-age customers unlikely to submit claims for benefits.
Now, lets think about this in other way, Imagine you are middle-age customer and you are proposed an excellent insurance policy that covers the diseases that afflict elderly.
Will you buy such a insurance??? Of course NOT! because you are middle-age person, and those diseases will not affect you soon. Then why to buy it? no reason! Thus, the strategy of attracting middle age customers is faulty!
So , what is the point? why GMAT considers this anwser choice correct?
_________________

Audaces fortuna juvat!

GMAT Club Premium Membership - big benefits and savings

Kudos [?]: 966 [0], given: 621

Re: CR: Insurance Company   [#permalink] 17 May 2010, 04:28
Display posts from previous: Sort by

# Insurance Company X is considering issuing a new policy to

Moderators: GMATNinjaTwo, GMATNinja

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne 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®.