Merritt Personal Lines Manual: Insurance Is a Business
It's important to remember that insurance is a business. Some people may think of insurance as a service that helps people in times of need, insurance companies operate to produce a profit. Therefore, they want to collect more in premiums than they pay out in claims.
If all of an insurance company's "insureds" filed claims at the same time, the company would go bankrupt. Fortunately, the odds of this happening are incredibly slim. To improve their odds, insurers will make some kinds of insurance (such as earthquake insurance in California and homeowners insurance in parts of Florida and other hurricane-prone areas) very hard to get...or very expensive.
If you file a lot of claims, your insurance company is going to raise your rates...not to punish you, but to make sure it can still earn a profit. Because claims often lead to higher rates, it is important to avoid filing small claims.
