An automobile insurance agency offers two policy options - one with a deductible of $400 and a premium of $1,900 and another with a deductible of $900 and a premium of $1,500. What is the auto insurer trying to achieve by offering these two options?

Question

Quizplus · Accepted Answer

By offering two policy options with different deductibles and premiums, the auto insurer is trying to attract both low-cost and high-cost customers. Low-cost customers will be more likely to choose the policy with a lower premium but a higher deductible, while high-cost customers will be more likely to choose the policy with a higher premium but a lower deductible. This allows the insurer to attract a broad range of customers with different risk profiles and price sensitivities. Therefore, low-cost customers will buy the $1,500 policy, and high-cost customers will buy the $1,900 policy.

An Automobile Insurance Agency Offers Two Policy Options - One