Critical Reasoning

Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

OA C . I chose E . Experts Please suggest

Hello again rahul,
You can treat this question as an assumption strengthener.

Assumtion because the trigger word SINCE before the ________ tells us we need to provide a PREMISE for the argument to be valid.

strengthener because the arguement flows as follows :

high interest rates ->> reduced premiums ->>leading to an overall increase in profits.
Now if you are selling biscuits and u reduce the price of biscuits- How are u likely to have an overall increase in profits ??
Answer -> You increase the number of biscuits sold.

look at answer choice C.
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged


Hope its clear.

(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

Choice E if it does anything is weaken the arguement - it says that the claim payout is directly proportional to the number of premiums sold, thus the company is in a loss.

jainrahul1985 wrote:Which of the following most logically completes the argument below?

When interest rates are high, insurance companies reduce the premiums they charge for many kinds of insurance policies. The reason is that insurance companies want to take in as much money as possible in premiums so that they can invest the money at high rates of interest. And premium reductions help achieve this objective, since __________.

(A) interest rates are likely to decrease when large amounts of money are available for loans
(B) smaller insurance companies are not able to amass enough money to take advantage of investing at high interest rates
(C) insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged
(D) an increase in the number of policies sold eventually leads to an increase in the number of claims that an insurance company has to pay
(E) the number of claims that insurance companies pay increases at a higher rate than does the number of policies that the insurance companies can sell at the lower premiums

OA C . I chose E . Experts Please suggest

The plan is to charge lower premiums.
The goal is to take in as much money as possible in premiums.

The correct answer must connect lower premiums with taking in as much money as possible in premiums.
Only answer choice C gives us what we need: insurance companies can sell many more insurance policies if they charge lower premiums than they would if they left premiums unchanged.
More policies sold = more premiums paid = more money in premiums taken in.

Any answer choice about interest rates or insurance claims is outside the scope. The argument is about one thing: taking in more money in insurance premiums.