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


Arrived at the answer by POE...but did not get d reasoning!!

imo B

here we need to justify the conclusion using the answer choice...

Premise 1: State regulates average rate the driver pays leaving reasonable margin for insurance company. This assumes rate is equal among all.

Premise 2: Driver who drives more distance on average pay rate/mile less than who drives more distance.

Concl: Therefore, Argonians who drive less than average partially subsidize the insurance of those who drive more than average.

Gap? The cost to insurance is less to support drivers who drive fewer miles on average. in other words, those who drive fewer miles do not end up in massively expensive accidents...

adi_800 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


Arrived at the answer by POE...but did not get d reasoning!!

my pick is D
The conclusion here is - "Argonians who drive less than average partially subsidize the insurance of those who drive more than average"

And this is because the regulations are such that the annual average number of miles griven is not a factor in calculating the insurance premiums.

So , if it can be shown that in the hypothetical scenario, if the regulation were not to exist , then the insurance companies could have derived more more out of drivers who drive more that the national average.

IMO b

I would choose B because if you cost an insurance company less, the company could charge you a lower rate and still make the same amount of profit.

What is the OA?

Oa is B
@deb...the conclusion is about those who drive less pay for the insurance of those who drive more...
Now if the insurance comp. does not spend more on those who drive less then only people driving less are paying for the cost of those who drive more...

lets say those who drive less pay 100 bucks to insurance comp.
N those who drive more also pay 100 bucks...
But if insurance comp. spends 150 bucks on drivers driving less and only 50 bucks on drivers driving more...
then the conclusion dat people driving less pay for insurance of those driving more will be weakened..

Hence B is d assumption eliminating this alternate consideration...

adi_800 wrote:Oa is B
@deb...the conclusion is about those who drive less pay for the insurance of those who drive more...
Now if the insurance comp. does not spend more on those who drive less then only people driving less are paying for the cost of those who drive more...

lets say those who drive less pay 100 bucks to insurance comp.
N those who drive more also pay 100 bucks...
But if insurance comp. spends 150 bucks on drivers driving less and only 50 bucks on drivers driving more...
then the conclusion dat people driving less pay for insurance of those driving more will be weakened..

Hence B is d assumption eliminating this alternate consideration...

@Adi - Thanks ... I totally got it wrong...