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Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?
Which of the following strategies would be most likely to minimize Company X's losses on the policies?
- a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.
- b)Insuring only those individuals who did not suffer any serious diseases as children
- c)Including a greater number of services in the policy than are included in other policies of lower cost
- d)Insuring only those individuals who were rejected by other companies for similar policies
- e)Insuring only those individuals who are wealthy enough to pay for the medical services
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Insurance Company X is considering issuing a new policy to cover servi...
Insurance companies can improve the ratio of revenues to claims paid, thus minimizing losses, if they insure as many people belonging to low-risk groups as they can. Because the strategy described in A adds a low-risk group to the pool of policyholders, this choice is the best answer. B is irrelevant, since no link is established between childhood diseases and diseases affecting the elderly. C is inappropriate, since increasing the number of services covered is unlikely to minimize losses. D is inappropriate, since it would increase the likelihood that claims against the policy will be made. Because policyholders will file claims against the policy for services covered rather than pay for the cost of the services themselves, E is irrelevant.
Most Upvoted Answer
Insurance Company X is considering issuing a new policy to cover servi...
Strategy to minimize Company X's losses on the policies:
Attracting middle-aged customers unlikely to submit claims for benefits for many years.
Explanation:
• The primary concern of Company X is whether the income from the policies would be sufficient to pay for the claims that would be made.
• If the policy is targeted towards elderly people who suffer from diseases that afflict the elderly, the chances of claims being made are high.
• Therefore, to minimize Company X's losses on the policies, it would be wise to attract middle-aged customers who are less likely to make claims for many years.
• Middle-aged customers are less likely to suffer from the diseases covered by the policy and may not need the services covered by the policy for a long time.
• Hence, the premiums collected from middle-aged customers would offset the claims made by elderly customers.
• This strategy would ensure that the income from the policies is sufficient to pay for the claims made and minimize Company X's losses on the policies.
Therefore, attracting middle-aged customers unlikely to submit claims for benefits for many years is the most likely strategy to minimize Company X's losses on the policies.
Attracting middle-aged customers unlikely to submit claims for benefits for many years.
Explanation:
• The primary concern of Company X is whether the income from the policies would be sufficient to pay for the claims that would be made.
• If the policy is targeted towards elderly people who suffer from diseases that afflict the elderly, the chances of claims being made are high.
• Therefore, to minimize Company X's losses on the policies, it would be wise to attract middle-aged customers who are less likely to make claims for many years.
• Middle-aged customers are less likely to suffer from the diseases covered by the policy and may not need the services covered by the policy for a long time.
• Hence, the premiums collected from middle-aged customers would offset the claims made by elderly customers.
• This strategy would ensure that the income from the policies is sufficient to pay for the claims made and minimize Company X's losses on the policies.
Therefore, attracting middle-aged customers unlikely to submit claims for benefits for many years is the most likely strategy to minimize Company X's losses on the policies.
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Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer?.
Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Insurance Company X is considering issuing a new policy to cover services required by elderly people who suffer from diseases that afflict the elderly. Premiums for the policy must be low enough to attract customers. Therefore, Company X 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 Company X's losses on the policies?a)Attracting middle-aged customers unlikely to submit claims for benefits for many years.b)Insuring only those individuals who did not suffer any serious diseases as childrenc)Including a greater number of services in the policy than are included in other policies of lower costd)Insuring only those individuals who were rejected by other companies for similar policiese)Insuring only those individuals who are wealthy enough to pay for the medical servicesCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for GMAT.
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