Critical Reasoning

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


I got the correct answer by POE, but i am not convinced how option B can be inferred from the stimuli above. How option B , if true, suggests that "Argonians who drive less than average partially subsidize the insurance of those who drive more than average." As i think that option B suggests that people below average are paying less amount than the people who are more than average, so they are not subsidizing the others.
Please explain if i am missing something.....

ketkoag 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


I got the correct answer by POE, but i am not convinced how option B can be inferred from the stimuli above. How option B , if true, suggests that "Argonians who drive less than average partially subsidize the insurance of those who drive more than average." As i think that option B suggests that people below average are paying less amount than the people who are more than average, so they are not subsidizing the others.
Please explain if i am missing something.....

Passage concludes,

The insurance paid by drivers who drive less than average compensates the insurance rate of drivers who drive more than average.

Thus, can be seen that the drivers who drive more than average, cost higher to the insurance company. This indicates that the two types of drivers are compensating the costs based on the no. of miles they drive. which is given in B.

Please correct if I am wrong.

ok, so here the word subsidize means compensate, right?
but how compensating the higher revenue generators make more profit as the first statement says that "In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit" Please elaborate further.....[/b]

ketkoag wrote:ok, so here the word subsidize means compensate, right?
but how compensating the higher revenue generators make more profit as the first statement says that "In Argonia the average rate drivers pay for car accident insurance is regulated to allow insurance companies to make a reasonable profit" Please elaborate further.....[/b]

Ketkoag,

Firstly, I interpret the statement in this way,

1. All drivers pay a constant amount of tax, giving reasonable profit to the insurance company, irrespective of the number of miles they drive.

2. But, the drivers who drive less than the avg. miles, subsidize the expenses for insurance company incurred while covering the drivers who drive more than the avg. miles.

Now, the question is targetting on the hidden assumption that links the above two statements.

From Options,

I find only B links the two statements properly by establishing a precise relationship between the expenses incurred between the driver who drive less than the avg, miles and the one who drives more than the avg. miles.

Hope, this would be of some help.

Pranay

Answer is clearly B here

B looks better than other options