What action can an insurance company take regarding a policy if they perceive an increased risk?

When an insurance company perceives an increased risk, they have the right to cancel or refuse to renew a policy. This is a standard practice within the insurance industry to mitigate potential losses if they believe that continuing coverage poses an unacceptable level of risk.

Insurance policies are typically based on an assessment of risk factors associated with the insured party. If circumstances change—such as the insured receiving multiple traffic violations, changes in the vehicle condition, or other factors associated with a higher likelihood of claims—the insurer may opt to take preventive measures. Cancelling or refusing to renew the policy allows the insurer to protect themselves from potential financial losses associated with the increased risk.

By contrast, managing claims more rigorously may help control costs but does not address the underlying risk factor that prompted the assessment. Informing the insured before taking action is a requirement, but it does not preclude the company’s ability to cancel or refuse renewal based on risk evaluation. Lastly, the obligation to continue coverage until the renewal date does not apply once a policy is terminated; the insurer can choose not to renew based on their risk assessment prior to the new policy period.