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Effect of Deductible Amounts on Insurance Claim Frequency

Abstract

Deductibles are amounts that policyholders are required to bear before an insurance company becomes responsible for the remaining portion of a covered loss. The level of deductible selected under an insurance policy can influence policyholder decisions regarding whether to report minor losses and may consequently affect the frequency of claims received by insurers. Understanding the relationship between deductible amounts and claim frequency is therefore important for insurance pricing, risk management, and the design of appropriate policy conditions. The study examines the effect of deductible amounts on insurance claim frequency. It will assess how variations in deductible levels influence the number of claims reported by policyholders over a specified period. The study will also compare claim frequency across policies with different deductible amounts and determine whether higher deductibles are associated with changes in the frequency of reported claims. The study will consider factors such as deductible amounts, claim frequency, claim severity, policy type, premium levels, policy duration, and historical claims experience. Statistical and actuarial techniques including descriptive statistics, frequency analysis, correlation analysis, and regression analysis will be applied to examine the relationship between deductible amounts and claim frequency. Comparative analysis will also be used to identify differences in claims behaviour across different deductible levels. A quantitative research approach will be adopted for the study. Historical insurance policy and claims data containing information on deductible amounts, reported claims, policy characteristics, and claims experience will be collected and analysed over a specified period. Descriptive statistics will be used to summarize deductible levels and claims frequency, while regression and correlation techniques will be applied to determine the extent to which deductible amounts influence reported claim frequency. The study is expected to reveal that deductible amounts have an important influence on insurance claim frequency. Policies with higher deductibles may experience lower reported claim frequency because policyholders may be less likely to submit claims for relatively small losses that fall within or close to the deductible amount. Conversely, policies with lower deductibles may record higher claim frequencies due to greater insurer responsibility for smaller losses. The strength of this relationship may vary across different types of insurance policies. The findings are expected to be useful to insurance companies, actuaries, underwriters, pricing analysts, and policyholders. Understanding the effect of deductible levels on claim frequency may assist insurers in developing appropriate pricing structures, estimating expected claims, controlling small claims, and improving risk classification. It may also help policyholders make informed decisions when selecting deductible levels in relation to premium costs and potential out-of-pocket expenses. The study concludes that deductible amounts are an important factor in understanding and managing insurance claim frequency. It is therefore recommended that insurers carefully consider deductible structures when designing insurance products and developing premium rating models. Regular analysis of deductible levels and claims experience may improve claims forecasting, pricing accuracy, risk management, and the overall efficiency of insurance operations.

Keywords: Deductible Amounts, Insurance Claim Frequency, Insurance Claims, Deductible Levels, Claims Experience, Claim Frequency, Claim Severity, Insurance Pricing, Risk Management, Actuarial Analysis, Underwriting, Policyholder Behaviour, Premium Pricing, Insurance Risk, Claims Management.