“The conventional wisdom (among consumers) is that if you file one really big claim, you’re thought of as being a ‘bad’ customer for the insurance company,” says Michael Braun, assistant professor of marketing at the Massachusetts Institute of Technology’s Sloan School of Management. “However, we’ve found that people who file larger claims are not necessarily bad customers.”

Instead, small claims — the ones that are not particularly catastrophic — are disproportionately expensive for an insurer to process. This is because smaller claims bear the same administrative costs as large ones. “Companies have to staff a call center to answer the phone when people call, they have to have adjusters ready and they have to have people reviewing all of the claims to make sure they are legitimate,” says Braun.

Smaller claims are also more expensive if they happen frequently. “If a claim was made because lightning struck a house, the likelihood of (lightning striking twice) would be small. It would probably not deter a competing insurance company from offering a competitive quote on that house,” says Young. “But if that house had a series of burglaries, it could deter an insurance company.” Premiums would likely increase substantially unless the homeowner could prove that significant protective devices were installed to reduce the chance of loss, she adds.