Insurance Fraud Awareness Practice Test

An insurance company may raise premiums when there is increased fraudulent activity because this type of behavior can lead to significant financial losses for the insurer. When fraud occurs, it can result in higher payout costs for claims, which directly affects the company’s bottom line. To offset these potential losses, insurers often adjust premiums for all policyholders as a risk management strategy. This adjustment helps the company maintain financial stability and ensure it can cover legitimate claims while deterring future fraudulent activities.

In contrast, the other options do not typically lead to an increase in premiums. Compliments from customers generally indicate satisfaction and do not have a direct impact on premium rates. The introduction of new policies may lead to varied premium calculations based on risk assessments, but that does not inherently mean premiums will rise. Lastly, a decrease in customer claims usually leads to reduced risks for the insurance company, which could potentially result in lower premiums rather than an increase.