As a result of frequent flooding, the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Holding demand for insurance constant, if flooding is expected to continue to be a problem:
A)flood insurance providers will reap greater profits.
B)there will be an increase in the number of insurance companies wishing to provide such insurance.
C)flood insurance markets may eventually collapse, since the risks of damage cannot be offset through diversification.
D)flood insurance markets will experience a decrease in the price of premiums.

Question

Quizplus · Accepted Answer

If flooding continues to be a problem, the risks and costs associated with flood insurance may become too high for insurers to manage, potentially leading to market collapse if they cannot diversify or manage these risks effectively.

As a Result of Frequent Flooding, the Insurance Market Has