GMAT Question of the Day - Daily to your Mailbox; hard ones only

It is currently 18 Jul 2018, 23:08

Close

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
Your Progress

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

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Technically a given category of insurance policy is under priced if

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

6 KUDOS received
Director
Director
User avatar
Joined: 04 Jan 2008
Posts: 821
Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post Updated on: 18 Dec 2017, 22:25
6
63
00:00
A
B
C
D
E

Difficulty:

  85% (hard)

Question Stats:

54% (01:54) correct 46% (01:54) wrong based on 2644 sessions

HideShow timer Statistics

Technically a given category of insurance policy is under priced 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 under priced 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 under priced 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 under priced 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 under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.

_________________

http://gmatclub.com/forum/math-polygons-87336.html
http://gmatclub.com/forum/competition-for-the-best-gmat-error-log-template-86232.html


Originally posted by nitya34 on 25 Mar 2009, 11:13.
Last edited by hazelnut on 18 Dec 2017, 22:25, edited 2 times in total.
Adding OA
Most Helpful Community Reply
2 KUDOS received
Retired Moderator
avatar
B
Joined: 23 Jul 2010
Posts: 524
GPA: 3.4
WE: General Management (Non-Profit and Government)
GMAT ToolKit User Premium Member
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 06 Nov 2013, 08:26
2
8
General Discussion
5 KUDOS received
Senior Manager
Senior Manager
avatar
Joined: 06 Mar 2006
Posts: 475
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 25 Mar 2009, 14:08
5
3
(A) No insurance policies are deliberately under priced in order to attract customers to the insurance company offering such policies. This is extreme language and irrelevant to the argument.
(B) A policy that represents a net loss to the insurance company is not an under priced policy in every case. The argument is about policy does not represents a net loss not that represent a net loss.
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set. Levels of claims is not the focus of the argument.
(D) The income earned by investing premium income is the most important determinant of an insurance company’s profits. This is again extreme language. Nowhere in the argument does the author mention about company's profit.
(E) The claims against at least some under priced policies do not require paying out all of the premium income from those policies as soon as it is earned. If the claims request to pay out all of the premium income, then those income could not be used to invest and thus will sure post a net loss in every case. This is correct assumption.
1 KUDOS received
Manager
Manager
avatar
Joined: 07 Jul 2007
Posts: 116
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 26 Mar 2009, 06:19
1
eileen1017 wrote:
(A) No insurance policies are deliberately under priced in order to attract customers to the insurance company offering such policies. This is extreme language and irrelevant to the argument.
(B) A policy that represents a net loss to the insurance company is not an under priced policy in every case. The argument is about policy does not represents a net loss not that represent a net loss.
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set. Levels of claims is not the focus of the argument.
(D) The income earned by investing premium income is the most important determinant of an insurance company’s profits. This is again extreme language. Nowhere in the argument does the author mention about company's profit.
(E) The claims against at least some under priced policies do not require paying out all of the premium income from those policies as soon as it is earned. If the claims request to pay out all of the premium income, then those income could not be used to invest and thus will sure post a net loss in every case. This is correct assumption.



Why you have chosen E? I don't think it is E but it is D)?
- Insurance company is not going to expect claim for every policy? (E).
1 KUDOS received
Manager
Manager
avatar
Joined: 07 Jul 2007
Posts: 116
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 26 Mar 2009, 06:20
1
Nitya, Can you please confirm what is the correct answer?
1 KUDOS received
Director
Director
User avatar
Joined: 04 Jan 2008
Posts: 821
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 26 Mar 2009, 09:21
1
OA-E

Admin:where is Kudo functionality?some bugs there :roll:
_________________

http://gmatclub.com/forum/math-polygons-87336.html
http://gmatclub.com/forum/competition-for-the-best-gmat-error-log-template-86232.html

1 KUDOS received
Senior Manager
Senior Manager
User avatar
Joined: 26 Jul 2009
Posts: 317
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 18 Sep 2009, 06:22
1
I have difficulty dismissing 'A' even though 'E' is the clear-cut answer...
1 KUDOS received
Director
Director
User avatar
Joined: 01 Apr 2008
Posts: 827
Name: Ronak Amin
Schools: IIM Lucknow (IPMX) - Class of 2014
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 18 Sep 2009, 12:31
1
boeinz wrote:
I have difficulty dismissing 'A' even though 'E' is the clear-cut answer...

A is clearly out of scope. Just think, is the argument anyway concerned about the motivation of insurance companies to attract more customers ? The argument only talks about 'under-priced policies' , for that matter not even normal/over-priced policies:)
Senior Manager
Senior Manager
User avatar
Joined: 03 Dec 2012
Posts: 290
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 05 Dec 2013, 20:33
the key to this question are the words "not in every case". so we are not actually looking for most cases or many cases. usually the words 'at least some' throw us off the hook. In this case at least some is sufficient and thats what we are looking for. and hence the answer is E.
2 KUDOS received
Manager
Manager
User avatar
Joined: 02 Jul 2012
Posts: 202
Location: India
Schools: IIMC (A)
GMAT 1: 720 Q50 V38
GPA: 2.6
WE: Information Technology (Consulting)
Reviews Badge
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 25 Oct 2014, 04:33
2
nitya34 wrote:
Technically a given category of insurance policy is under priced 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 under priced 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 under priced 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 under priced 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 under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.



The statement says that a policy is under priced if the claims associated with it exceed the total income, then it states that the premium can be invested and it will yield returns of its own.

The first assumption that came to my mind is that every premium that is deposited is invested and that every deposited premium gives returns.

A - The statement doesn't talk about how the customers are attracted
B - The cases are not discussed
C - This answer could have been a better trap, had the word "accuracy" not used in it.
D - This is another trap. The statement didn't talk about the profits of the insurance companies.
E - That's the answer. It matches the initial assumption I had. This is a finely worded answer. It has used "SOME", which means that the range of policies is from one to all.

E
_________________

Give KUDOS if the post helps you... :-D

Current Student
User avatar
Joined: 06 Mar 2014
Posts: 257
Location: India
GMAT Date: 04-30-2015
Reviews Badge
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 02 Nov 2014, 10:06
Option E seems correct from various angles.

1. Process of Elimination leaves one with option D coming close but due to its mention of the "determinant" of company's "profits" gives it away. As the whole essence of an assumption that links the 'given' premise to the conclusion is defaulted.

2. Meaning: Option E clearly becomes the choice that MUST be true for the Conclusion 'under priced policy does not represent a net loss in [b]every case'[/b] to be true.

3. Tone: Option E is the only option that uses Light tones unlike other choices that are very restrictive and uses strong tones like must/should/most.

P.S. Option 3 need not be the ONLY criteria for eliminating an option as there maybe some exceptions to the rule for certain CR questions. Ultimately, a coherent structure of the above 3 steps ensures that option E is a clear winner.
Intern
Intern
avatar
Joined: 23 Dec 2014
Posts: 21
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 02 Mar 2015, 07:26
So difficul :/ I do not 7nderstand it
Manager
Manager
User avatar
Joined: 11 Nov 2011
Posts: 68
Location: United States
Concentration: Finance, Human Resources
GPA: 3.33
WE: Consulting (Non-Profit and Government)
GMAT ToolKit User
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 31 Jul 2015, 08:32
nitya34 wrote:
Technically a given category of insurance policy is under priced 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 under priced 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 under priced 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 under priced 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 under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.

Need Explanations


Interesting question. I picked D but then I realized that extreme word such as 'most' is a sign of trap :D
Intern
Intern
avatar
Joined: 22 May 2014
Posts: 2
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 15 Aug 2015, 10:17
nitya34 wrote:
Technically a given category of insurance policy is under priced 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 under priced 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 under priced 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 under priced 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 under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.

Need Explanations



I feel we need to revisit option B :

According to GMAT, If the argument says A --> B, then the argument safely assumes that B -/-> A.
Using the same logic, wouldnt B be the correct choice.

Please help me understand this.
3 KUDOS received
Senior Manager
Senior Manager
User avatar
B
Joined: 01 Nov 2013
Posts: 316
GMAT 1: 690 Q45 V39
WE: General Management (Energy and Utilities)
Reviews Badge
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 15 Aug 2015, 13:09
3
MBAisaMYTH wrote:
nitya34 wrote:
Technically a given category of insurance policy is under priced 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 under priced 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 under priced 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 under priced 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 under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.

Need Explanations





I feel we need to revisit option B :

According to GMAT, If the argument says A --> B, then the argument safely assumes that B -/-> A.
Using the same logic, wouldnt B be the correct choice.

Please help me understand this.



There is no causality in the argument.

Conclusion- an under priced policy does not represent a net loss in every case.

an Under priced Policy =either a Net loss policy OR a NO Net loss policy

Option B -A policy that represents a net loss to the insurance company is not an under priced policy in every case

Net loss policy = either Under priced policy OR NOT an Under priced policy

Now do you think that option B is necessary for the conclusion!!!

I hope the above helps.

I DONOT MIND KUDOS
_________________

Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.

I hated every minute of training, but I said, 'Don't quit. Suffer now and live the rest of your life as a champion.-Mohammad Ali

Intern
Intern
avatar
Joined: 22 May 2014
Posts: 2
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 16 Aug 2015, 04:54
Thank you samichange. This surely helps ! The conclusion is not a causal relationship. It is simply is an inference !
Manager
Manager
avatar
B
Joined: 20 Apr 2014
Posts: 101
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 23 Sep 2015, 16:39
i learnt that in assumption questions, we first look at option that includes negative statement or "at least ..." as a defender assumption. power score CR bible. may help !
Retired Moderator
User avatar
S
Joined: 18 Sep 2014
Posts: 1165
Location: India
GMAT ToolKit User Premium Member Reviews Badge
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 23 Sep 2015, 21:33
Technically a given category of insurance policy is under priced 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 under priced 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 under priced in order to attract customers to the insurance company offering such policies.
(This is new info as we have no info whether a policy is under-priced or not in the argument. It just defines a category.)
(B) A policy that represents a net loss to the insurance company is not an under priced policy in every case.
(opposite of conclusion)
(C) There are policies for which the level of claims per year can be predicted with great accuracy before premiums are set.
(We don't need to assume regarding prediction of claims)
(D) The income earned by investing premium income is the most important determinant of an insurance company’s profits. (importance is not given profits here as author spoke only of losses)
(E) The claims against at least some under priced policies do not require paying out all of the premium income from those policies as soon as it is earned.
(This indicates a possible assumption and indicates that claims do not require paying out all the incomes implying that it need not result in a loss.)
_________________

The only time you can lose is when you give up. Try hard and you will suceed.
Thanks = Kudos. Kudos are appreciated

http://gmatclub.com/forum/rules-for-posting-in-verbal-gmat-forum-134642.html
When you post a question Pls. Provide its source & TAG your questions
Avoid posting from unreliable sources.


My posts
http://gmatclub.com/forum/beauty-of-coordinate-geometry-213760.html#p1649924
http://gmatclub.com/forum/calling-all-march-april-gmat-takers-who-want-to-cross-213154.html
http://gmatclub.com/forum/possessive-pronouns-200496.html
http://gmatclub.com/forum/double-negatives-206717.html
http://gmatclub.com/forum/the-greatest-integer-function-223595.html#p1721773
https://gmatclub.com/forum/improve-reading-habit-233410.html#p1802265

Intern
Intern
avatar
Joined: 21 Feb 2013
Posts: 8
Schools: Arizona State"19
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 07 Oct 2015, 04:30
D is certainly wrong, look the stimulus says Insurance policy and Option D talks about Insurance Company.
If you negate E the conclusion falls apart.
Stimulus: CLAIM+EXPENSE > PREMIUM......
our purpose is to add a premise so that CLAIM+EXPENSE<=PREMIUM+INTE REST(from loans)

Hope it helps!!
Manager
Manager
avatar
Status: tough ... ? Naaahhh !!!!
Joined: 08 Sep 2015
Posts: 64
Location: India
Concentration: Marketing, Strategy
WE: Marketing (Computer Hardware)
GMAT ToolKit User
Re: Technically a given category of insurance policy is under priced if [#permalink]

Show Tags

New post 07 Oct 2015, 04:44
I came out with D initially, but E is the clear winner.
Re: Technically a given category of insurance policy is under priced if   [#permalink] 07 Oct 2015, 04:44

Go to page    1   2    Next  [ 30 posts ] 

Display posts from previous: Sort by

Technically a given category of insurance policy is under priced if

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  

Events & Promotions

PREV
NEXT


GMAT Club MBA Forum Home| About| Terms and Conditions and Privacy Policy| GMAT Club Rules| Contact| Sitemap

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®.