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# Technically a given category of insurance policy is

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Manager
Joined: 02 Sep 2008
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Technically a given category of insurance policy is [#permalink]

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29 Mar 2009, 17:26
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9. 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.

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29 Mar 2009, 22:21
milind1979 wrote:
9. 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.

E is the best

If "paying out all of the premium income..." is required of right away, there is No PREMIUM INCOME be invested, and therefore NO returns at all.
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Director
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Name: Ronak Amin
Schools: IIM Lucknow (IPMX) - Class of 2014

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29 Mar 2009, 23:26
Agree with E. What is OA>
sondenso wrote:
milind1979 wrote:
9. 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.

E is the best

If "paying out all of the premium income..." is required of right away, there is No PREMIUM INCOME be invested, and therefore NO returns at all.

Kudos [?]: 869 [0], given: 18

Manager
Joined: 02 Sep 2008
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31 Mar 2009, 20:11
OA -> E

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Director
Joined: 23 May 2008
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16 Apr 2009, 14:45
yup E

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Manager
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16 Apr 2009, 17:55
I agree on E.

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Manager
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10 Jun 2009, 03:23
It's E for me too.

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SVP
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10 Jun 2009, 06:01
E for me too

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Re: CR....3   [#permalink] 10 Jun 2009, 06:01
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# Technically a given category of insurance policy is

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