The average cost of automobile insurance in the United States was 20%

Question

The average cost of automobile insurance in the United States was 20% higher for the period between 2004 and 2007 than it was during the period between 2000 and 2004. Despite this increase, the proportion of insurance policies to vehicle ownership remained constant during both periods. We can therefore conclude that motorists' willingness to insure their vehicles is unaffected by fluctuations in the cost of insurance.

Which of the following, if true, would most convincingly lend weight to the conclusion above?

(A) Up-to-date automobile insurance is required by law in all American states.

(B) The decrease in vehicle ownership as of 2004 was negligible in most states.

(C) Several less expensive insurance policies were introduced to the market in 2004.

(D) Fewer people bought automobiles between 2000 and 2004 than did after 2004.

(E) The rate of accident-related insurance claims peaked between 2004 and 2005.

SOURCE: PREP-ADVISER

ShankSouljaBoi · Answer

VeritasKarishma  can you please explain as to why B is not correct ? Also, can we use quant for this question, since the stem mentions proportional increase ?

Regards

KarishmaB · Answer

Let's take some numbers.

................................................................ Period 1 ('00 to '04) ............... Period 2 ('04 to '08)

Avg insurance cost ........................................ 100 .............................................120

Insurance policies/vehicle ownership.............. 0.5 .............................................. 0.5

Even with the increase in avg insurance cost, same percentage of vehicle owners bought insurance policies. If there were 1000 vehicle owners in period 1, 500 bought policies. If there were 1200 owners in period 2, 600 of them bought policies.

Conclusion: Motorists' willingness to insure their vehicles is unaffected by fluctuations in the cost of insurance.
Even though the cost of insurance has increased, still 50% motorists bought the policy.

What strengthens this conclusion:

(A) Up-to-date automobile insurance is required by law in all American states.

What law requires is irrelevant. We are talking about the willingness of motorists in the two periods.

(B) The decrease in vehicle ownership as of 2004 was negligible in most states.

Considering that we have figures in terms of insurance policies/vehicle ownership, increase or decrease in number of vehicle ownership should have no impact.

(C) Several less expensive insurance policies were introduced to the market in 2004.

Avg insurance cost has increased over the period. If several less expensive insurance policies were introduced in 2004 but avg insurance cost has still increased, apparently people are not buying lost cost policies or are buying high cost policies too. The percentage ownership of policies did not increase even though low cost policies were introduced. Then it is likely that willingness to buy policies does not depend on cost of policy. Of the given options, I would select this, if I had to.

(D) Fewer people bought automobiles between 2000 and 2004 than did after 2004.

Again, vehicle ownership in itself doesn't change anything. We know that the percentage of people getting insurance is the same. If given official answer is (D), I am not sure why. I would need to see the OE. Considering that car insurance policies are bought annually (or at least repeatedly) and number of vehicle ownership depends on how many vehicles were sold out too, I am not sure how they explain this as answer.

(E) The rate of accident-related insurance claims peaked between 2004 and 2005.

High rate of claims in 2004 and 2005 could explain the increase in insurance cost but that is irrelevant to us.

udaypratapsingh99 · Answer

First of all option B talks about insurance as on year 2004. If it had talked for the period 2004 - 2007, it would have added value.
Secondly, even if it had talked about 2004 - 2007 period, it would have implied a negligible effect(ie little decline)... while option D talks about a totally opposite(increasing trend).

Option D is Correct.

sony1000 · Answer

IMO D is correct because it claims that drivers did not mind the increase on insurance rates and went ahead and purchased more cars after 2004. Yet, my only issue with this one is that there could be other factors involved on the increase of purchases, though out of all 5 answers this is the best one.

Avgguy · Answer

GMATNinja , why is the answer D?

YashYashkratos · Answer

selected D) as it says people bought new cars after 2004 and if you think about it > this shows people did actively get more cars and insured them and not because they had to for their already owned cars.
weak strengthener but ya strongest of all.

The average cost of automobile insurance in the United States was 20%

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