In a cancellable individual policy, what can the insurer do if there are more claims than expected?

In a cancellable individual policy, the insurer has the option to manage financial risk by increasing premiums or lowering coverage if there are more claims than expected. This is a fundamental aspect of insurance risk management. When the claims exceed what was anticipated, the insurer needs to maintain their financial stability and meet the obligations to pay claims. By adjusting the premiums upward or reducing the benefits, the insurer can align the policy's costs with the actual risk being covered. This adaptability is essential for the insurer's ongoing viability and ability to provide coverage.

Guaranteed renewal of the policy would not address the financial implications of increased claim costs directly. It assures the policyholder that their coverage will continue, but it does not allow the insurer to adjust for unexpected claims. Providing additional benefits at no cost would increase the insurer's liability, which is contrary to the need to address higher-than-expected claims. Switching to non-cancellable status would not be a feasible solution either, as non-cancellable policies typically prevent the insurer from changing premiums or coverage terms for the life of the policyholder; thus, they cannot adjust to financial changes from claims.