How can the existence of a claims history affect insurance premiums?

The existence of a claims history can serve to increase premiums based on past claims because it provides insurers with a record of risk associated with a particular property or business. When an insurance company evaluates a potential client, they assess the claims history to determine the likelihood of future claims. A history that includes multiple claims indicates a higher risk level, making the insurer more likely to increase premiums to offset the potential costs of future claims. This practice is grounded in the principle of risk assessment, as insurers seek to protect their financial interests by adjusting rates to reflect the insured's risk profile. Hence, properties with a significant claims history are viewed as more risky, leading to higher premiums as a precautionary measure against possibly recurrent issues or damages.