On car insurance policies,Prairie Ranch Insurance Company offers drivers an option: Policy 1 features a deductible of $2000 and it requires a driver to pay an annual premium of $500; Policy 2 features a deductible of $500 and it requires a driver to pay an annual premium of $750.Why does the company offer two policies

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Prairie Ranch is attempting to sort out the safe drivers from the risky drivers by offering two policies with different deductibles and premiums. Safe drivers may choose Policy 1 with a higher deductible and lower premium, while risky drivers may choose Policy 2 with a lower deductible and higher premium. This allows the company to charge a higher premium to risky drivers who are more likely to make a claim, while offering a lower premium to safe drivers who are less likely to make a claim.

On Car Insurance Policies,Prairie Ranch Insurance Company Offers Drivers an Option