Critical Reasoning

imskpwr wrote: (A) Attracting middle-aged customers unlikely to
submit claims for benefits for many years
(B) Insuring onlythose individuals who did not suffer
any serious diseases as children
(C) Including a greater number of services in the
policy than are included in other policies of
lower cost
(D) Insuring onlythose individuals who were rejected
by other companies for similar policies
(E) Insuring only those individuals who are wealthy
enough to pay for the medical services

imskpwr wrote:InsuranceCompany X is considering issuing a new
policyto cover services required by elderly people
who suffer from diseases that afflict the elderly.
Premiums for the policy must be low enough to attract
customers. Therefore, Company X is concerned that
the income from the policies would not be sufficient to
pay for the claims that would be made.

Which of the following strategies would be most likely
to minimize Company X's losses on the policies?

A) Attracting middle-aged customers unlikely to
submit claims for benefits for many years
(B) Insuring onlythose individuals who did not suffer
any serious diseases as children
(C) Including a greater number of services in the
policy than are included in other policies of
lower cost
(D) Insuring onlythose individuals who were rejected
by other companies for similar policies
(E) Insuring only those individuals who are wealthy
enough to pay for the medical services

GMATGuruNY wrote:

imskpwr wrote:InsuranceCompany X is considering issuing a new
policyto cover services required by elderly people
who suffer from diseases that afflict the elderly.
Premiums for the policy must be low enough to attract
customers. Therefore, Company X is concerned that
the income from the policies would not be sufficient to
pay for the claims that would be made.

Which of the following strategies would be most likely
to minimize Company X's losses on the policies?

A) Attracting middle-aged customers unlikely to
submit claims for benefits for many years
(B) Insuring onlythose individuals who did not suffer
any serious diseases as children
(C) Including a greater number of services in the
policy than are included in other policies of
lower cost
(D) Insuring onlythose individuals who were rejected
by other companies for similar policies
(E) Insuring only those individuals who are wealthy
enough to pay for the medical services

Only one answer choice suggests a way to minimize losses:
A; Attracting middle-aged customers unlikely to submit claims for benefits for many years.
Thus:
MIDDLE-AGED customers will pay premiums.
Because the policy pays only for services required by ELDERLY PEOPLE for diseases that afflict the ELDERLY, no claims will be paid to these MIDDLE-AGED customers.
Even if these customers still have the policy when they become elderly and start making claims, the company will at the same time be attracting NEW middle-aged customers.
The result:
There will always be a pool of middle-aged customers paying premiums but not making any claims, MINIMIZING losses.

The correct answer is A.

GMATGuruNY wrote:

imskpwr wrote:InsuranceCompany X is considering issuing a new
policyto cover services required by elderly people
who suffer from diseases that afflict the elderly.
Premiums for the policy must be low enough to attract
customers. Therefore, Company X is concerned that
the income from the policies would not be sufficient to
pay for the claims that would be made.

Which of the following strategies would be most likely
to minimize Company X's losses on the policies?

A) Attracting middle-aged customers unlikely to
submit claims for benefits for many years
(B) Insuring onlythose individuals who did not suffer
any serious diseases as children
(C) Including a greater number of services in the
policy than are included in other policies of
lower cost
(D) Insuring onlythose individuals who were rejected
by other companies for similar policies
(E) Insuring only those individuals who are wealthy
enough to pay for the medical services

Only one answer choice suggests a way to minimize losses:
A; Attracting middle-aged customers unlikely to submit claims for benefits for many years.
Thus:
MIDDLE-AGED customers will pay premiums.
Because the policy pays only for services required by ELDERLY PEOPLE for diseases that afflict the ELDERLY, no claims will be paid to these MIDDLE-AGED customers.
Even if these customers still have the policy when they become elderly and start making claims, the company will at the same time be attracting NEW middle-aged customers.
The result:
There will always be a pool of middle-aged customers paying premiums but not making any claims, MINIMIZING losses.

The correct answer is A.

imskpwr wrote:
(E) Insuring only those individuals who are wealthy enough to pay for the medical services

what about E?

GMATGuruNY wrote:

imskpwr wrote:
(E) Insuring only those individuals who are wealthy enough to pay for the medical services

what about E?

The purpose of the policy is TO COVER SERVICES required by elderly people.
If all of the people insured are wealthy, who cares?
The insurance company will still have to TO COVER SERVICES required by these wealthy, elderly people.
Also, insuring only WEALTHY people seems to contradict the premise that premiums must be LOW ENOUGH to attract customers.

RBBmba@2014 wrote: I think, Option E is a misleading/flawed statement for the following reasons as well -

1. Insuring only wealthy individuals capable of paying for the medical services -- WHY then most of those wealthy individuals would need Insurance at all ?

2. If they avail Insurance then why they would pay on their own after paying Insurance premiums ? It's unlikely.So claim still would go up for wealthy and ELDERLY individuals!