For similar cars and drivers, automobile insurance for collision damag

Question

For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.

Which of the following is an assumption on which the argument depends?

(A) Repairing typical collision damage does not cost more in Greatport than in Fairmont.

(B) There are no more motorists in Greatport than in Fairmont.

(C) Greatport residents who have been in a collision are more likely to report it to their insurance company than Fairmont residents are.

(D) Fairmont and Greatport are the cities with the highest collision-damage insurance rates.

(E) The insurance companies were already aware of the difference in the likelihood of collisions before the publication of the police reports.

nightblade354 · Accepted Answer

For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.

P: For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont
P: Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont
C: Therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.

Greatport insurance more expensive than Fairmont. Less car accidents in G. Therefore, insurance makes more. Well, what if the cars are more expensive? This seems like the biggest assumption made so let's try and find it below.

Which of the following is an assumption on which the argument depends?

(A) Repairing typical collision damage does  not  cost more in Greatport than in Fairmont. --   I don't like it, but it is as close as we get. If the cars don't cost more to repair, then the insurance makes more money (huge assumption made). I wish this had said "insurance companies don't pay more", but we have to deal with it. For the negation, if they do cost more, the argument is ruined.

(B) There are  no  more motorists in Greatport than in Fairmont. --  But we are talking about averages, so we do not care about number of vehicles .

(C) Greatport residents who have been in a collision are  NOT  more likely to report it to their insurance company than Fairmont residents are. --  This is reversed to a certain extent. If this were the other way around, it would be an assumption (the argument would be destroyed because the comparison wouldn't be accurate). But if they are not more likely, then the numbers are correct and the accident rates are comparable.

(D) Fairmont and Greatport are  NOT  the cities with the highest collision-damage insurance rates. --  OK, but who cares about the rates of collision in the country or world? We just care about the comparison between the two cities listed.

(E) The insurance companies were  NOT  already aware of the difference in the likelihood of collisions before the publication of the police reports. --  Who cares if they were aware? The argument isn't about motivation, but the result. And the argument believes that the result is that G makes more money than F.

Zeka · Answer

My answer is A.
Only possibility that an insurance company, which has higher taxes in a city where its residents are, on average, slightly less likely to be involved in a collision than residents from other city is making less profit is that mentioned company spends more money on repairing damage. In stimulus , the conclusion is different...so then - A

pitts20042006 · Answer

I vote for A. 

If it were true that in Greatport it costs more to get your car repaired then charging more in insurance would make sense. But because the author assumes that it does not cost more, hence he concludes that ....

I don't think I have explained properly. Official ans?

abhishekmayank · Answer

Let us look into the contenders for the answer :

(A) Repairing typical collision damage does not cost more in Greatport than in Fairmont.

(B) There are no more motorists in Greatport than in Fairmont.

I understand that option A is correct. But the option B can not be rejected because it is talking about the absolute number whereas question stem talks about the average - as pointed out in other replies. In fact, "absolute number" makes this option viable contender. An average is similar to percentage. If the average collision is less then it doesn't mean that associated absolute number is also less. So if the average number of collision in GreatPort is less, it does not mean that total number of collision in the city is fewer than in Fairmont.

As per this understanding, experts could you help me as to how the option B can be rejected. Only reason comes to my mind for its rejection is that if the absolute number of collisions of insured vehicle is more - in spite of less average - then it also means that more insurance money paid to the customer is counter balanced by more insurance premium collected, hence earning more profits.

Hi  AndrewN ,

Your insight is needed. Thanks in advance

AndrewN · Answer

The problem with (B),  abhishekmayank , is that it makes no difference one way or the other whether there  are  more motorists in Greatport. An assumption is a condition that  must  hold for the argument to make sense. This argument, that  insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont , could be based on the same number of motorists in each of Greatport and Fairmont, or it could be based on a different number. Your reasoning traces a could-be-true scenario when a must-be-true is needed instead. I agree with  nightblade354  that (A) hinges upon the test-taker filling in the blank that insurance companies, not motorists, foot the bill to repair collision damage, but if (A) were  not  true, then that  clearly  in the conclusion is quite hard to justify.

I hope that helps. Thank you for thinking to ask me about the question.

- Andrew

Piscine15 · Answer

I can deduce that option A is correct one only by looking at the conclusion. I want to know how the assumption is linking premise to the conclusion?

MartyMurray · Answer

Here are the premises:

For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont.

Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont.

Here's the conclusion that the premises support:

Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.

We see that the premises are about the "cost," or price, of automobile insurance for collision damage and the relative frequencies of collisions in Greatport and Fairmont.

Then the conclusion is about the "profit" of insurance companies.

So, the argument assumes that the conclusion about profit is supported by the premises about cost and frequency.

The correct answer,  (A) Repairing typical collision damage does not cost more in Greatport than in Fairmont , connects the premises about cost and frequency to the conclusion about profit by filling in another piece of information that we need since, for insurance companies, profit = total cost of insurance - (frequency of collisions * cost of repairing typical collision damage).

SpiceWoodYoYo · Answer

Why can't this be E, I get why it can be A but I'm not able to find why not E?

guddo · Answer

I’d say (E) is not required because the conclusion is about  how much profit the insurers actually make , not about what they knew when setting the rates.

Even if the companies were unaware that Greatport drivers have fewer collisions, they could still be making more profit there. Their  knowledge of the risk difference does not determine the profit itself .

(A), however, matters directly: if repairs cost much more in Greatport, the higher premiums could simply cover higher claim costs rather than produce higher profit.

For similar cars and drivers, automobile insurance for collision damag

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

For similar cars and drivers, automobile insurance for collision damag

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards