Pro-Tect Insurance Company has recently been paying out more on car-theft claims than it expected. Cars with special antitheft devices or alarm systems are much less likely to be stolen than are other cars. Consequently Pro-Tect, as part of an effort to reduce its annual payouts, will offer a discount to holders of car-theft policies if their cars have antitheft devices or alarm systems.
In one or two years, the discount that Pro-Tect is offering will amount to more than the cost of buying certain highly effective antitheft devices provides the strongest indication that the plan is likely to achieve its goal.