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When interest rates are high, insurance companies reduce the

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When interest rates are high, insurance companies reduce the  [#permalink]

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New post Updated on: 30 Jun 2018, 03:13
1
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A
B
C
D
E

Difficulty:

  5% (low)

Question Stats:

89% (01:23) correct 11% (01:43) wrong based on 806 sessions

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Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Originally posted by mohnish104 on 12 Nov 2013, 23:22.
Last edited by Vyshak on 30 Jun 2018, 03:13, edited 1 time in total.
Removed the poll as difficulty level gets adjusted automatically
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Re: When interest rates are high, insurance companies reduce the  [#permalink]

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New post 13 Nov 2013, 00:57
3
Because of "since", we need an assumption to complete the argument.

Which of the following most logically completes the argument below?

Fact: interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies.
Reason: insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest.
Conclusion: Premium reductions help achieve this objective (take in as much money as possible), since __________.

How to take in as much money as possible --> insurance companies need to SELL as many insurance contracts as possible. <-- the assumption we need.

(A) interest rates are likely to decrease when large amounts of money are available for loans
Wrong. Nothing about interest rates decrease --> Not relevant.

(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
Wrong. Nothing about smaller/bigger companies --> Not relevant.

(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
Correct. C means, the more insurance policies sold, the more money took in.

(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
Wrong. Nothing about claims --> Not relevant.

(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums
Wrong. Nothing about claims --> Not relevant.

Hope it helps.
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Re: When interest rates are high, insurance companies reduce the  [#permalink]

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New post 30 Nov 2014, 18:49
its between C and E.

bottom line, once you have narrowed down to 2 choice please always analyze them critically before you mark your answer choice. This is very important on 700 level questions.

E is bit tricky to understand (atleast for me, i am non-native), but when you reread it, basically it says that claim increase faster then sales that is completely wrong choice so eliminate.

Answer: C

mohnish104 wrote:
Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

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Re: When interest rates are high, insurance companies reduce the  [#permalink]

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New post 14 Sep 2018, 23:26
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: When interest rates are high, insurance companies reduce the &nbs [#permalink] 14 Sep 2018, 23:26
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