After Hurricane Katrina,there was considerable public outrage that many of the properties were not insured against flooding although they were insured against wind damage.What might explain these different approaches to insurance?
A) The risk of wind damage is potentially diversifiable, but the risk of flooding is not.
B) The risk of flood damage is potentially diversifiable, but the risk of wind damage is not.
C) predatory insurance policies
D) Neither the risk of wind damage or the risk of flooding is diversifiable.

Question

Quizplus · Accepted Answer

The risk of wind damage is potentially diversifiable, meaning that it is possible to spread the risk across different locations or properties. However, the risk of flooding is not diversifiable because it affects a larger geographical area and can cause widespread damage. Therefore, insurance companies may be less willing to insure against flooding, as it poses a higher potential risk.

After Hurricane Katrina,there Was Considerable Public Outrage That Many of the Properties