Question

Vasquez-Morrell Assurance specializes in insuring manufacturers. Whenever a policyholder makes a claim, a claims adjuster determines the amount that Vasquez-Morrell is obligated to pay. Vasquez-Morrell is cutting its staff of claims adjusters by 15 percent. To ensure that the company’s ability to handle claims promptly is affected as little as possible by the staff cuts, consultants recommend that Vasquez-Morrell lay off those adjusters who now take longest, on average, to complete work on claims assigned to them.
Which of the following, if true, most seriously calls into question the consultants’ criterion for selecting the staff to be laid off?

• A. If the time that Vasquez-Morrell takes to settle claims increases significantly, it could lose business to other insurers.
• B. Supervisors at Vasquez-Morrell tend to assign the most complex claims to the most capable adjusters.
• C. At Vasquez-Morrell, no insurance payments are made until a claims adjuster has reached a final determination on the claim.
• D. There are no positions at Vasquez-Morrell that currently employ the adjusters who have the longest time to complete claims.
• E. The premiums that Vasquez-Morrell currently charges are lower than those charged by its competitors.

Hint:

When evaluating recommendations, consider whether they account for the complexity of the work or just raw efficiency metrics.

Answer 1

The Correct Option is B

Step 1: Understanding the consultants' criterion.
The consultants suggest laying off adjusters who take the longest time to settle claims, assuming that those who take longer are less efficient. However, if the more complex claims are assigned to more capable adjusters, it could mean that the adjusters who take longer are actually the most capable, and laying them off could hurt the company’s ability to handle complex claims.
Step 2: Analyzing the options.
- (A) While losing business is a concern, it does not directly address the flaw in the consultants’ criterion for selecting which staff to lay off.
- (B) This is the correct answer. If the most complex claims are assigned to the most capable adjusters, those adjusters would naturally take longer, suggesting that the consultants' criterion may lead to the removal of the most skilled workers.
- (C) This is irrelevant because it pertains to the payment structure, not the efficiency of the claims adjusters.
- (D) If there are no such positions, the consultants' recommendation is moot, but it doesn’t address the flaw in the criterion.
- (E) The price of premiums does not relate to the criterion used for selecting claims adjusters to be laid off.
Step 3: Conclusion.
The correct answer is (B), as it challenges the assumption that those who take longer are less efficient, showing that they might actually be the most capable adjusters.