The main purpose of a deductible is to reduce the cost of insurance. The deductible represents a sharing of risk between insurer and insured. It makes the insured responsible for small losses.
For example, when you have a $1000 deductible, it means any losses under $1000 are your responsibility. This encourages insureds to take extra care and practice better risk prevention. This is related to a concept known as moral hazard. When fewer losses happen, insurers need less money to settle claims, which means lower premiums for everyone.
By asking insureds to handle small losses themselves, insurers also save money on administrative costs. The claims process is expensive—even when you ignore actual settlement costs—so it’s more efficient to focus efforts on handling big claims where the insureds really need the help. Lower administrative costs also help insurers keep premiums low.