An insurance provider faces two distinct market failures arising from asymmetric information:

• Situation 1: Individuals with a high risk of chronic illness are disproportionately more likely to purchase comprehensive healthcare plans, while healthy individuals opt out.
• Situation 2: Once insured, policyholders tend to adopt less healthy lifestyles and skip routine preventative check-ups because their treatment costs are fully covered.

To combat these, the provider introduces Policy A (requiring a comprehensive medical history report and examination before a policy is issued) and Policy B (introducing a £250 excess/co-payment for every medical claim).

Which of the following correctly pairs the situations with their corresponding market failure and the policy designed to mitigate them?