IMO B

IMO B.

Not D because, the question stem talks about how costs gets subsidized by different kinds of drivers and D focusses on how we can increase the actual profit of insurance companies which is out of scope of question.

Hope it helps.

IMO B: The conclusion says the drivers who drive less subsidize the drivers who drive more, this can only hold if the 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. If B is not true than the conclusion won't hold. If the average cost is not less for drivers who drive less, than they are not subsidizing the other drivers.

gmat009 wrote: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........

Premises:
Car insurance is regulated.
The rate does not depend on the distance traveled.

From these flimsy facts, the argument reaches the conclusion that people who drive less than the average subsidize the people who drive more than the average - meaning that the people who drive more than the average are getting a discount on what they should, by all rights, be paying for insurance in a just world.

After reading the argument, stop for a second and think: What's going on? What should the right answer say?
there's a bit of a leap between the premises and the conclusion: all we know is that drivers apparently pay the same rate, regardless of how much they drive. This does not, by itself, imply that the situation is unbalanced where the "grandmas" of the world are subsidizing the "traveling salesmen" - unless we are assuming that "the more you drive, the more insurance you SHOULD pay". So the right answer should focus on that - state that the argument assumes that the amount of driving you annually do SHOULD have an effect on how much insurance you pay.

B does exactly that - it says that grandmas cost less to the insurance companies than traveling salesmen, and thus should (theoretically) be charged less than them. the fact that all these people end up paying the same thing means that grandmas are paying more than they should, while salesmen benefit by paying less than they should.

IMO : B