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27 Jun 2019, 12:14
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C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
76% (01:56) correct
24%
(02:09)
wrong
based on 395
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Not Attempted Yet
In a troubled economy, experienced drivers with no moving violations are more likely to lose their cars due to failure to make car payments, than due to accidents in which the vehicle is totaled. Despite this, most banks and finance companies require borrowers to have collision insurance, although they do not require insurance against disability or loss of employment.
Which of the following, if true, best explains the banks' insurance requirements?
(A) Insuring against accidents is generally more expensive than insuring against disability or loss of employment.
(B) Many people don't like to consider the possibility that they may lose their jobs.
(C) Loss of employment or disability of the driver does not affect the value of a vehicle to a bank or finance company.
(D) Some people are more sympathetic to a driver who loses his car due to an accident than to one who loses it due to failure to make payments.
(E) Most employers do not insure their employees against a temporary loss of income due to injuries from a car accident.
Which of the following, if true, best explains the banks' insurance requirements?
(A) Insuring against accidents is generally more expensive than insuring against disability or loss of employment.
(B) Many people don't like to consider the possibility that they may lose their jobs.
(C) Loss of employment or disability of the driver does not affect the value of a vehicle to a bank or finance company.
(D) Some people are more sympathetic to a driver who loses his car due to an accident than to one who loses it due to failure to make payments.
(E) Most employers do not insure their employees against a temporary loss of income due to injuries from a car accident.
27 Jun 2019, 17:28
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Mahmoudfawzy83
Imo C
It is an incentive situation. Banks have more to gain from insurance if car is damaged in the accident whereas the value of car is not affected by loss of the employment of its owner thus banks have to incentive to have insurance for loss of employment. They can still sell the vehicle at the market price to recover their loan amount, earning more money.
28 Jun 2019, 03:14
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Quote:
The right answer here is C. The paradox we are looking to resolve is that banks want collision insurance rather than job-loss insurance. This question is also inadvertently an interesting critique of capitalism, as what we are looking for is a reason for why banks prefer this situation.
A - If insuring against accidents is more expensive, then it actually deepens the paradox, because it makes less sense as to why banks prefer the latter. OUT
B - This may explain why people don't get job loss insurance, not why banks don't ask for it. OUT
C - If loss of employment doesn't affect the value of a vehicle, then loss of employment for the driver is not a liability for the bank. Hence, it doesn't matter to them. This option is both CORRECT and a good example of how property is valued higher than human life under capitalist societies.
D - People being sympathetic does not impact in any way the reasons for (not)requiring insurance. OUT
E - If this is the case, it would require the further assumption that banks ask for something based on what employers provide. We don't have any info regarding this, making this option irrelevant and OUT.
- Matoo
