What are three elements that affect claims cost in insurance?

The correct answer highlights three crucial elements that influence claims costs in insurance: policy type, applicant's personal information, and personal history.

Policy type is fundamental because different types of policies have varying coverage limits, exclusions, and pricing structures. For instance, a comprehensive auto insurance policy will typically involve higher premiums and claims costs than a basic liability policy due to the broader range of coverages.

The applicant's personal information plays a significant role in determining claims costs because it encompasses various factors, such as age, driving record, and credit history. Insurers assess this personal data to evaluate the risk associated with insuring the individual, directly impacting the premiums and potential claims payouts.

Personal history, which includes past claims made, is also pivotal. A history of frequent claims might prompt an insurer to project higher future claims costs, thereby influencing premiums and coverage terms. Individuals with a record of responsible behavior, such as maintaining a clean driving record or having no prior claims, are often rewarded with lower costs, as they present a lower risk to insurers.

This combination of these elements helps insurers predict potential losses and set premiums accordingly, making the answer comprehensive and accurate in addressing factors that affect claims costs.