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Argonia

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by gmat009 » Tue Oct 28, 2008 7:28 am
In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit. Under the regulations, the rate any individual driver pays never depends on the actual distance driven by that driver each year. Therefore, Argonians who drive less than average partially subsidize the insurance of those who drive more than average.

The conclusion above would be properly drawn if it were also true that in Argonia
(A) the average accident insurance rate for all drivers rises whenever a substantial number of new drivers buy insurance
(B) the average cost to insurance companies of insuring drivers who drive less than the annual average is less than the average cost of insuring drivers who drive more than the annual average
(C) the lower the age of a driver, the higher the insurance rate paid by that driver
(D) insurance company profits would rise substantially if drivers were classified in terms of the actual number of miles they drive each year
(E) drivers who have caused insurance companies to pay costly claims generally pay insurance rates that are equal to or lower than those
paid by other drivers

Plz. explain........
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by PAB2706 » Tue Oct 28, 2008 7:41 am
IMO E ..but not quite sure.... :roll:
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by Mani_mba » Tue Oct 28, 2008 7:51 am
IMO B.

B is assumed here.

If Avg Cost to insurance companies of insuring drivers who drive less than annual average is NOT LESS THAN Avg Cost to insurance companies of insuring drivers who drive more than annual average, then conclusion is not supported.
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Re: Argonia

by logitech » Tue Oct 28, 2008 7:53 am
In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit. Under the regulations, the rate any individual driver pays never depends on the actual distance driven by that driver each year. Therefore, Argonians who drive less than average partially subsidize the insurance of those who drive more than average.


SUBSIDIZE!

So they all pay the same amount no matter how many miles they drive but the ones who drives more actually COST more to the insurance companies, which is clearly stated in B

The conclusion above would be properly drawn if it were also true that in Argonia
(A) the average accident insurance rate for all drivers rises whenever a substantial number of new drivers buy insurance
(B) the average cost to insurance companies of insuring drivers who drive less than the annual average is less than the average cost of insuring drivers who drive more than the annual average
(C) the lower the age of a driver, the higher the insurance rate paid by that driver
(D) insurance company profits would rise substantially if drivers were classified in terms of the actual number of miles they drive each year
(E) drivers who have caused insurance companies to pay costly claims generally pay insurance rates that are equal to or lower than those
paid by other drivers
LGTCH
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"DON'T LET ANYONE STEAL YOUR DREAM!"
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by Bidisha800 » Tue Oct 28, 2008 7:32 pm
(B) it is.
Drill baby drill !

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by gmat009 » Wed Oct 29, 2008 7:12 am
Mani_mba wrote:IMO B.

B is assumed here.

If Avg Cost to insurance companies of insuring drivers who drive less than annual average is NOT LESS THAN Avg Cost to insurance companies of insuring drivers who drive more than annual average, then conclusion is not supported.
I am still not clear. According to conclusion "Argonians who drive less than average partially subsidize the insurance of those who drive more than average. "

So B is saying opposite of the conclusion.
IMO E is the best.
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by amitabhprasad » Wed Oct 29, 2008 9:21 am
As pointed by Logitech.
'B" is most accurate where it describes "Subsidy".
Whats OA
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by vivek.kapoor83 » Wed Oct 29, 2008 10:29 am
IMO it should be D. As it says..that by defining insurance amt bby the no of Kms they drive...companies can be in profit..So, IMO D>
OA pls
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by jyotiistalking » Wed Oct 29, 2008 11:08 am
i am stuck in between b and d
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by Somerandomguy » Wed Oct 29, 2008 2:25 pm
I think this question hinges on a sufficient condition. The argument claims that insurance companies charge premiums based on other factors that do not include distance (perhaps age, frequency of accidents...)

So we should find a statement when combined with the argument above to still allow the conclusion to follow (those who drive less subsidize others who drive more).

(A) the average accident insurance rate for all drivers rises whenever a substantial number of new drivers buy insurance
Eliminate: This is making an unwarranted prediction. Who knows, maybe a substantial increased number of new drivers lower the cost?


(B) the average cost to insurance companies of insuring drivers who drive less than the annual average is less than the average cost of insuring drivers who drive more than the annual average
I think this is the correct AC. It pretty much summarizes the conclusion.

(C) the lower the age of a driver, the higher the insurance rate paid by that driver
Eliminate: unwarranted assumption. It could be a number of different factors combined to increase the insurance rates. Perhaps the lower age combined with driving an old car would still result in a net decrease.


(D) insurance company profits would rise substantially if drivers were classified in terms of the actual number of miles they drive each year
Eliminate: unwarranted prediction. It "would" rise? Where the....

(E) drivers who have caused insurance companies to pay costly claims generally pay insurance rates that are equal to or lower than those
paid by other drivers
Eliminate: unwarranted assumption. I would guess that those who cause insurance companies to pay costly claims would pay an INCREASE in premiums.
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by nervesofsteel » Wed Nov 05, 2008 2:01 am
B as both type of drivers pay equal premium

if less than average miles drivers cost less then the premium paid by them can be used to subsidize type 2 drivers

and company can be profitable
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by navami » Tue Jun 07, 2011 9:22 am
IMO E. Experts seek help with this


-Thanks in Advance.
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by sanabk » Tue Jun 07, 2011 10:19 am
B
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by vikram4689 » Tue Jun 07, 2011 5:35 pm
gmat009: please explain your doubt, IMO B
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by sandeep800 » Wed Jun 08, 2011 1:26 am
Confused between B and D
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