Which factors might lead to an increase in insurance premiums?

The choice indicating that a history of frequent claims can lead to an increase in insurance premiums is grounded in the fundamental principles of risk assessment used by insurers. Insurance operates on the basis of risk pooling, where premiums collected from policyholders support the claims made by those who experience losses.

When an individual has a repeated history of filing claims, it signals to insurers that this person poses a higher risk. Insurers evaluate their potential future losses based on past behaviors, and frequent claims can suggest that the individual is more likely to experience additional claims. Consequently, this perceived increase in risk prompts insurers to raise premiums to cover the higher likelihood of payouts. Such adjustments reflect the cost of insuring a higher-risk individual versus someone with fewer claims who poses a lesser financial risk to the insurer.

This relationship emphasizes the critical nature of an insured's claim history in determining premium rates.