Self-study
Melinda: Hazard insurance decreases an individual's risk by judiciously spreading the risk among many policyholders.
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Argument Summary
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We Didn't Start The Fire
Melinda describes how insurance reduces an individual’s risk by spreading it among many others. Jack disagrees on the grounds that insurance doesn’t reduce one’s risk of an incident.
Melinda uses “risk” to mean “risk of financial ruin,” whereas Jack uses it to mean “risk of a catastrophic event.” Insurance works by having a large group of people each chip in a small amount of money, then paying out large sums to individuals who experience catastrophe.
The risk of your home burning down is small, but without insurance the consequences can be financially ruinous. Fire insurance won’t prevent your house burning down, but it will bankroll all your repairs and replacement possessions if your house does burn down, reducing your risk of financial ruin.
12.
Jack's response most clearly trades ██ ██ █████████ ██ █████ ███ ██ ███ █████████ ███████████ ████ ██ ████████
a
judiciously spreading
While Jack arguably ignores Melinda’s concept of judiciously spreading risk (since judiciously spreading the risk that your house will burn down makes no sense), he doesn’t take advantage of some different meaning of the word “spread”.
b
many policyholders
Jack equivocating on the expression “many policyholders” would be him playing with the (hopefully familiar) idea that many can mean a few or a million – “If I only spread the risk between me and two buddies that doesn’t do much.” That’s just not what’s happening here.
c
risk
As described in the summary (look left), Melinda uses “risk” to mean “risk of financial ruin,” whereas Jack uses it to mean “risk of a catastrophic event.”
d
decreases
(D) is perhaps tempting because Jack’s response differs from Melinda’s with respect to the thing that is decreasing. Melinda talks about the risk of financial ruin decreasing, whereas Jack talks about the risk of fire decreasing.
But the concept of “decreasing” holds the same meaning throughout – it means “lessen” or “make smaller.” The ambiguity isn’t in what it means for something to decrease, the ambiguity is in what decreases (i.e. risk).
e
hazard insurance
Jack gives a specific example of an insurance policy covering a potential hazard—a housefire—so he doesn’t trade on any ambiguity in this term.