Increase in Insurance Rates Essay Example | Topics and Well Written Essays - 500 words

Increase in Insurance Rates - Essay Example As result the rate directly relates to the premium paid. One factor that causes insurance rates to the increase is the occurrences of particular risks. For instance, an increase ion the occurrences of auto accidents in a particular region ill normally lead to the increase of the premium charged for motor cover. Several instances have been evidenced where the prevalence of a particular risk has led to insurance firms charging higher interest rates for such risks. Other insurers have been noticed to shun covering such risks. Another factor that has seen insurance rates go up is the moral hazard among the insured. This is the situation where the insured party takes no responsibility to prevent the occurrence of risks (G, 1960). This normally arises from the gratification that â€Å"after all I am insured.† The person therefore takes no duty to prevent certain risks from occurring. This will in the long run, lead to an increase in the prevalence of some risks. As a result, insuran ce firms will progressively increase the rates so that the insured chuck out more in form of premiums. The increase in the uncertainties realized in some dimensions in life has made insurance firms take radical measures to ensure they can cope with such situations.