GMAT Essays (AWA)

Q: Insurance policies guaranteeing the policy holder’s income if he/she becomes permanently disabled will surely provide the insurance industry with a popular and profitable product. The cost of the policy to a worker at average risk is very little, and the benefits paid to the disabled far outweigh this cost.

Explain how logically persuasive you find this argument.

The writer concludes that the Insurance policies guaranteeing the policy holder’s income if he/she becomes permanently disabled will provide the insurance industry with a popular and profitable product. The writer believes that as cost of the policy to a worker is very little and benefits paid far outweigh, more and more people will sign up for the policy. In doing so the writer makes some faulty assumptions without providing any evidence.

First, the writer assumes that the number of people signing up for the insurance policy will ensure that the policy is profitable, i.e. the revenues earned will more than compensate the cost incurred by the insurance industry to pay for the benefits of the disabled policy holders. The writer could have done a better task by providing data or evidence to support this assumption.

Second, the writer talks about the worker’s average risk but does not define it. He goes on to say that the cost to a worker at average risk is very little. But his assumption that a worker with average risk will sign up for the policy is also flawed as it may happen that these worker are not interested in this policy since they are aware of their minimal risk why would they pay to be in a policy, whose returns they may never reap. If this happens and workers at high risk of a permanent disability sign up for this policy in large numbers, the insurance industry may well have to pay large sums in claims and may end up making losses instead of profits.

Therefore, the writer has done a poor job of predicting a policy’s success without solid evidences and clearly outlined assumptions.