Insurance Company!

[Ozlemg]

Insurance Company X is considering issuing a new policy to 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 only those 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 only those 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

OA A

[GmatKiss]

IMO:A

[supreetb]

i am little confused here, doesn't the premise state that the policy is for elderly people struck with elderly diseases, then how can the company give out the policy to middle aged.

i think i get into too much detail.

[Ozlemg]

i am little confused here, doesn't the premise state that the policy is for elderly people struck with elderly diseases, then how can the company give out the policy to middle aged.

i think i get into too much detail.

It asks what the company should do (change the target segment ) not to lose money from the claims...

[GmatKiss]

Given:
Claims made from elderly customers will be more than the premium paid by them.

Goal:
A way to fill the this loss!!

A. Attracting middle-aged customers unlikely to submit claims for benefits for many years. (Only option which helps)
B. Insuring only those individuals who did not suffer any serious diseases as children (Does not help a insurance company, and against the consideration)
C. Including a greater number of services in the policy than are included in other policies of
lower cost (Will not help, infact makes the loss more!)
D. Insuring only those individuals who were rejected by other companies for similar policies (No way!, again against the consideration and does not help)
E. Insuring only those individuals who are wealthy enough to pay for the medical services (Cannot do this!, seriously against any insurance company, and against the consideration)

Hope it helps

[BlindVision]

Insurance Company X is considering issuing a new policy to 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 only those 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 only those 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

OA A

A

Helps offset the potential loss of claims paid to the elderly.

[vaibhav.temani]

I like the way GMATKiss destroyed option B-E to check A, but I didn't understand why is A the correct answer. A policy which covers elderly diseases cannot be applied on middle segment unless its a lifetime policy or something. Doesn't this bring into question the requirement of outside knowledge? My concern is that GMAT is assuming here that i know if an elderly policy can be applied to middle segment. Nothing of that sort is part of argument.

Please do reply if you think my reasoning is incorrect and there is a simpler way, which makes A correct.

Anyway, will be best to eliminate B-E and rock!