How can frequent claims reflected in a loss run affect a policyholder?

Frequent claims reflected in a loss run can lead to increased premiums for a policyholder. Insurance companies assess the risk associated with insuring a policyholder based largely on their claims history. When a policyholder has a history of frequent claims, it indicates a higher risk of future claims. Consequently, insurers often respond to this elevated risk by increasing the premiums for that policyholder to mitigate potential losses.

The rationale behind this is straightforward: insurance is based on the principle of risk assessment. If a policyholder has consistently demonstrated a higher likelihood of making claims, the insurer must account for this in their pricing structure. This can place a financial burden on the policyholder, as they may find their insurance costs rising significantly, making it essential for them to manage risks effectively to maintain affordability in their premiums.

In contrast, options related to providing better coverage options, encouraging policy transfers, or avoiding further risk assessments are not typically associated with frequent claims. These scenarios often arise in different contexts and are not direct outcomes of a high frequency of claims reflected in a loss run.