Nationside, an insurance company, is considering issuing a new policy

Curious why E isn't acceptable.

While it's true that customers that were rejected by other companies is likely due to a high potential of accident, it allows Nationside to be predatory in their issuance. If they're the ONLY company that is willing to issue the insurance, the driver will need to pay the very high price or not drive at all.

Unethical, sure, but you can maximize profits that way.

B seems best: Marketing the new policy to older drivers with a history of minor automobile accidents only

reasoning: satisfies both the condition of the premise : drivers who are elderly and have a record of car accidents AND at the same time if accidents are minor then COST to the company is going to be less and with more such customers the premium can be brought down

Can you please edit the original question and number the options? Currently they are not easily distinguishable

To maximize the profit, market to those who would live longer and cause fewer accidents. C states that.
BUT the premises restrict us as the policy is only for those who are 'elderly and have a record of car accidents'.

Therefore IMHO, B is the best answer.

Please let me know if im wrong.

Hi expert,
Please help me understand the deduction from the correct option B.
In my 2 cents,we don't know the severity of the accidents;hence it can't be conclude that the specific marketing strategy would help maximize the company's profit.It could be that those who mostly make claims are elder and have minor accident.

Did I miss any crucial information from the passage?
Thanks

Minor accidents imply less damage payment. Therefore the profit would be maximized. Hence option B is correct.

(The marketing MUST be done to older people because the policy is made for older people- hence options C and D can be eliminated.)

Premise: New policy for elderly drivers who have a record of accidents.— potential customers
High premiums— will not opt— concern for revenue less than claims.

Aim: to maximise profits from the new policy

Prethinking: profit = total premium - claims

So we need to look for an option that will have less claims.


A. Marketing the new policy to older drivers with a history of automobile accidents of any type—incorrect, since they still will have to pay for claims

B. Marketing the new policy to older drivers with a history of minor automobile accidents only— if the accidents are minor, claims will be less. Correct

C. Marketing the new policy to younger drivers with no history of automobile accidents—not for younger drivers, irrelevant

D. Marketing the new policy to younger drivers with some history of automobile accidents— irrelevant

E. Marketing the new policy to older drivers who were rejected by other companies for similar policies—they are already a trouble. Incorrect

A. Marketing the new policy to older drivers with a history of automobile accidents of any type
This may lead to more damages and more expenses to the company

B. Marketing the new policy to older drivers with a history of minor automobile accidents only
this is a good strategy.Policy purchases will increase and expenses will decrease. Correct

C. Marketing the new policy to younger drivers with no history of automobile accidents
Dont care about younger drivers

D. Marketing the new policy to younger drivers with some history of automobile accidents
Same as C

E. Marketing the new policy to older drivers who were rejected by other companies for similar policies
This might work, but we do not know about drivers' accident record. Cannot decide on the expenses

OFFICIAL EXPLANATION:

Reading the question: this prompt presents a fairly weak argument; the many vulnerabilities are potentially distracting. But we are asked something rather specific: which strategy will maximize profits in the new policy. It looks like we might be able to largely ignore the conclusion of the argument and focus on a critical detail. It's a perfect example of why we should keep an eye on the question stem while digesting the prompt.

Creating a filter: the phrase "most likely" is a case of logical understatement in the argument. We can prove by stronger terms and look for what's critical. That's maximizing profits. Profits are revenues minus costs, so our strategy will maximize profits and/or minimize costs. A fact is that the drivers are elderly and accident-having. They sound expensive to insure, but we can't change that parameter. We can at least hope they have minimal accidents. Let's take that prediction as our filter to the answer choices.

Applying the filter: Our prediction exists in the form of answer choice (B). Choices (C) and (D) argue with the facts: this policy is for elderly drivers. Choice (A) describes an option that will cost more than (B), since Nationside will have to pay out more to cover accidents, so it's only better if we can jack up the revenues in (A) much higher than in (B). But the second sentence of the argument implies that we can't do that. So (A) is objectively inferior to (B) and is out. Choice (E) is similar to (A): if the drivers were rejected by other policies, it's probably because they are more expensive. Or, if that's outside knowledge that we're not supposed to bring to bear on this question, (E) is simply irrelevant.

The correct answer is (B).

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