Critical Reasoning

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kewton-cr

Automobile Insurance Company Y is considering issuing a new family-friendly policy to parents with children under the age of 20. This policy would cover any damage to a vehicle incurred by both the parent and his or her children. Premiums for the policy must be low enough to attract customers. Therefore, Company Y 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 Automobile Insurance Company Y's losses on the policies?

· Attracting parents with younger children who are unlikely to cause vehicular damage until they are of driving age.

· Turning down drivers who have received greater than the average number of moving or non-moving violations.

· Including more flexible add-on options than are included in other policies of lower cost.

· Insuring only those drivers who were rejected by other companies for similar policies.

· Insuring only those drivers who are wealthy enough to pay for the damages.