Claim Frequency
How often you file insurance claims, measured as claims per year (e.g., 0.2 = 1 claim every 5 years).
What You Need to Know
Claim frequency is a key metric insurers use to assess risk and set premiums. It measures how often you file claims over a given period.
How It's Calculated:
Example 1: 3 claims over 15 years
- Claim frequency = 3 ÷ 15 = 0.2 claims/year
- Means: 1 claim every 5 years on average
Example 2: 1 claim over 3 years
- Claim frequency = 1 ÷ 3 = 0.33 claims/year
- Means: 1 claim every 3 years
Why It Matters:
Insurers use claim frequency to:
- Predict future claims
- Set premium rates
- Decide whether to renew your policy
- Classify you as low/medium/high risk
Impact on Premiums:
Low Frequency (< 0.1): Rarely file claims
- Preferred customer status
- Lower rates, accident forgiveness eligibility
- Build multi-year claims-free discounts
Medium Frequency (0.1-0.3): Occasional claims
- Standard rates
- May lose discounts after claims
High Frequency (> 0.3): Frequent claims
- Significantly higher premiums (40-60% increases)
- Difficulty finding coverage
- Risk of non-renewal or cancellation
Strategic Considerations:
When to File vs. Pay Out-of-Pocket:
Filing small claims increases your frequency and future premiums. Rule of thumb: Only file claims where repair cost exceeds deductible + 3 years of expected rate increases.
Example:
- Repair: $1,500
- Deductible: $500
- Insurance pays: $1,000
- Rate increase: +30% × $1,800 premium = +$540/year × 3 years = $1,620
- Total cost of filing: $500 + $1,620 = $2,120
- Better to pay out-of-pocket: $1,500
Frequency Reset: Most insurers look back 3-5 years for claims. Older claims "fall off" and don't affect your current frequency calculation.
Sources & References
This information is sourced from authoritative government and academic institutions:
- naic.org
https://www.naic.org/cipr_topics/topic_insurance_fraud.htm
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