The stipulations for that pricing tier may be determined upon your payment history, your past claims occurrences, your driving record, or other actuarial statistics that the insurance company uses to help predict the favorability and profitability of writing insurance policies for clients like you.
The tier is based on parameters that are automatically applied given the specifics of your account and the rates in each tier are predetermined. Contrary to what may seem to be occurring, this tiering isn’t arbitrarily based upon any one individual’s decision to increase your rates, but instead set by algorithmic measures.
When writing what is considered to be “homogenous” types of risk or risks that are similar in type and exposures, like most homeowners insurance, insurance companies use statistics and the law of large numbers to determine how to appropriately price an account.
Based on the prior loss experiences of all of their customers, the insurance company can more accurately predict the percentage of accounts that will experience claims and certain specific situations may indicate a greater likelihood of a future claim. One of these indicators is “prior losses” and, as such, having a claim on your account may place you in a less favorable tier upon renewal.