CII Certificate in Insurance - Insurance Underwriting Process (IF3) Practice Test 2025 - Free Practice Questions and Study Guide

High claim frequency typically indicates that a large number of claims are being made within a specific period. This frequency can trigger a financial strain on an insurer, as they must payout more frequently, leading to increased risks associated with policies. Consequently, insurers often respond by adjusting their pricing strategies to maintain profitability.

When claim frequency is high, insurers may find it necessary to raise premiums. This adjustment reflects the higher risk associated with insuring clients who frequently make claims. Additionally, if the claims become excessively burdensome, insurers might decide to refuse coverage for certain individuals or groups altogether, especially if they recognize a pattern of high claims from similar profiles.

Therefore, increased premiums or potential refusal of coverage is a direct response insurers might employ in situations where claim frequency is significantly high. This serves as a risk management technique to protect their financial stability while continuing to operate within the market.