Homeowners Policies Exclude Loss Caused by Flood Due to the Problem

Multiple Choice

Homeowners policies exclude loss caused by flood due to the problem of adverse selection because:

A) only large insurers would be able to insure flood risk, creating unfair competition.
B) only those living in flood-prone areas would buy the coverage.
C) it encourages nonfortuitous events.
D) only stock insurers would insure flood risk.
E) only mutual insurers would insure flood risk.