An insurance company proposes to introduce a new policy for owners of

Question

An insurance company proposes to introduce a new policy for owners of cottage industries. The policy will cover health insurance costs for any of their employees who sustain injuries at the workplace. The insurance company estimates that even if just two per cent of the two million companies belonging to the cottage industry buy the policy, the company will effectively gain over 400,000 customers.

Which of the following, if true, presents the most serious flaw in the plan outlined above?

Almost every company belonging to the cottage industry is owned and run by single entrepreneurs with no employees.
  There are actually almost three million firms that belong to the United States cottage industry, and not two million as estimated by the company.
  The insurance company has made substantial profits with its healthcare policies.
  According to a recent poll conducted by the company, forty out of the hundred companies that were surveyed expressed interest in the policy.
  A firm with fifty or fewer employees is usually less successful than one that employs more people.

Nevernevergiveup · Answer

The insurance company estimates that even if just two per cent of the two million companies  belonging to the cottage industry buy the policy, the company will effectively  gain over 400,000 customers.

Which of the following,  if true, presents the most serious  flaw  in the plan outlined above?

Almost every company belonging to the cottage industry is owned and run by single entrepreneurs with no employees.
 (This weakens the conclusion) 
  There are actually almost three million firms that belong to the United States cottage industry, and not two million as estimated by the company.
 (This supports the conclusion) 
  The insurance company has made substantial profits with its healthcare policies.
 (This is out of scope.) 
  According to a recent poll conducted by the company, forty out of the hundred companies that were surveyed expressed interest in the policy.
 (This supports the conclusion as this is more than 2%) 
  A firm with fifty or fewer employees is usually less successful than one that employs more people.
 (This is out of scope.)

GGMU · Answer

Easy one... A

Almost every company belonging to the cottage industry is owned and run by single entrepreneurs with no employees.  points out a flaw in the conclusion 
  There are actually almost three million firms that belong to the United States cottage industry, and not two million as estimated by the company.  strengthens the conclusion. 
  The insurance company has made substantial profits with its healthcare policies.  Not concerned with the profits 
  According to a recent poll conducted by the company, forty out of the hundred companies that were surveyed expressed interest in the policy.  Not about how many are interested... but it's about how many would actually become customers 
  A firm with fifty or fewer employees is usually less successful than one that employs more people.  Out of scope as we don't want to know about any firms sucess

sun01 · Answer

I didn't get this. The premise says that "The policy will cover health insurance costs for any of their employees who sustain injuries at the workplace." Argument further states that 2% of 2 million companies will give the insurance company around 400000 customers.

The question asks to find the flaw in plan.

Choice A can't be true as it is going against the premise.

The question asks to find the flaw in plan.

Choice A can't be true as it is going against the premise.

Nevernevergiveup · Answer

AryamaDuttaSaikia

While I agree that A is the only weakener as if there are no employees Insurance company will not get any customers by that 2%.
But there is a problem with figures here.

According to premise: The insurance company estimates that even if just 2% of the two million companies belonging to the cottage industry buy the policy, the company will effectively gain over  400,000 or  4*(10^5)  customers.

One million (1,000,000) or one thousand thousand is the is written as  10^6 .
Given two million companies are present indicate  2*(10^6)  companies
2% of 2 million means   4*(10^4)  customers

Did u observe the difference in two highlighted portions in argument. Please correct it.

Kurtosis · Answer

An insurance company proposes to introduce a new policy for owners of cottage industries. The policy will cover health insurance costs for any of their employees who sustain injuries at the workplace. The insurance company estimates that even if just two per cent of the two million companies belonging to the cottage industry buy the policy, the company will effectively gain over 400,000 customers.

Which of the following, if true, presents the most serious flaw in the plan outlined above?

Almost every company belonging to the cottage industry is owned and run by single entrepreneurs with no employees.   - If there are no employees, the plan of the insurance company wont suffice
  There are actually almost three million firms that belong to the United States cottage industry, and not two million as estimated by the company.   - If there are 3 million firms it favors the insurance company.
  The insurance company has made substantial profits with its healthcare policies.   - Irrelevant
  According to a recent poll conducted by the company, forty out of the hundred companies that were surveyed expressed interest in the policy.   - Irrelevant 
  A firm with fifty or fewer employees is usually less successful than one that employs more people.   - Irrelevant

sun01 · Answer

Can someone explain it?

To me, A can't be taken as weakener on its face value. The argument clearly highlights that insurance companies believes to attain minimum 2 % of 2 million companies. '

It is inferred that the company under cottage industry has employees. How can you contradict this statement?

Any true answer shouldn't contradict the premise given in argument, rather it attacks the reasoning or method of reasoning.

Nevernevergiveup · Answer

sun01 
According to the argument
An insurance company proposes policy that covers health insurance costs for any of employees of cottage industries. The company approached the owners so that the owners will make the employees register for the offer. There is no rule that these companies cannot be startups or single entrepreneurs with no employees.

And as per A
 Almost every company belonging to the cottage industry is owned and run by single entrepreneurs with no employees. 
 Almost every  indicates majority of companies without removing the possibility of few or none of companies with few employees.

This just weakens the possibility of the conclusion becoming true.
It does not prove it to be false completely.

Even if these few companies have many employees, the option A says that the target of over 400,000 customers may not be reached.
So A does not contradict premise.

AryamaDuttaSaikia · Answer

Explanation:

The insurance company plans to sell a new policy to the owners of cottage industry companies and thereby gain at least 400,000 customers (assumed to be the employees covered by the policy). The question asks us to weaken (point out a possible problem with) this plan.

CORRECT . If almost every such company is run by only the owner and does not have any employees, there is very little reason to believe that a market exists for a policy aimed at the employees of cottage industry companies.
The fact that the actual number of possible customers is higher than the estimated number given in the argument would strengthen the argument, making this option the opposite of what we want.
It is difficult to imagine a scenario in which the high profitability of previous or existing healthcare policies would make the insurance company's plan to gain 400,000 customers with its new policy less likely to succeed.
This option strengthens the argument, because 40% is significantly greater than 2%. The company needs only 2% to gain 400,000 customers.
This option does not clearly indicate which group cottage industry companies would fall under. Additionally, this option does not cast doubt over the ability of these industries to take insurance cover because no mention of insurance is made in the entire option.

sun01 · Answer

Thanks for explanation.

VerbalBot · Answer

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An insurance company proposes to introduce a new policy for owners of

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An insurance company proposes to introduce a new policy for owners of

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