Which NFIP issue is highlighted as a problem with participation?

• A. Many do not purchase flood insurance even though it's mandatory
• B. Flood insurance is cheap
• C. People misperceive risk
• D. FEMA's maps are perfect

Answer: (A)

The main idea being tested is participation and compliance with NFIP requirements. The highlighted problem is that many property owners in flood-prone areas do not purchase flood insurance even though it is mandatory for certain properties or mortgage holders. This gap between the rule and actual behavior undermines the program’s risk transfer goal, since a large share of risks remain uninsured and lenders may face greater exposure or incomplete coverage when claims arise.

In this light, the option about widespread nonpurchase despite mandatory requirements best captures the participation issue. The other points don’t address participation directly: whether insurance is cheap can affect willingness to buy but isn’t the participation problem itself; misperceiving risk influences demand, but not the fact that people are failing to comply with mandatory coverage; and claiming FEMA maps are perfect is inaccurate and not about participation.