How does insurance fraud affect policyholders?

Insurance fraud significantly impacts policyholders primarily through the financial repercussions it creates for the entire insurance system. When fraudulent claims are made, insurers often respond by raising premiums across the board to cover the associated costs of these fraudulent activities. This increase in premiums can affect policyholders who have never committed fraud, leading them to pay higher rates than necessary. Additionally, insurers may respond to an increase in fraud by tightening their underwriting processes or limiting coverage options for certain types of policies or beneficiaries, further impacting consumers' choices and affordability.

The other options do not accurately reflect the effects of insurance fraud on policyholders. For instance, the idea that it reduces the number of claims that can be filed overlooks the fact that while fraudulent claims might be disallowed, honest claims can still be filed and are not inherently reduced by fraud. The notion that fraud enhances benefits for low-risk policyholders misrepresents the reality that fraud generally creates a burden on all policyholders, rather than providing them with enhanced benefits. Lastly, the suggestion that it guarantees lower deductible rates ignores the fact that higher levels of fraud can lead to an increase in deductible rates as insurers seek to mitigate financial losses. Thus, option B accurately captures the adverse effects of insurance fraud on premiums and coverage options for policyholders.