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, flood insurance premiums will most likely:
A) rise.
B) fall.
C) stay the same.
D) rise, fall, or stay the same.

Question

Quizplus · Accepted Answer

If flooding is expected to continue, the risk associated with providing flood insurance increases, leading insurers to raise premiums to cover the higher expected payouts.

As a Result of Frequent Flooding, the Insurance Market Has