You renew your car or health insurance, and there it is again — a higher deductible than last year. You haven't filed any claims. You've been careful. So why does it feel like you're paying more to get less?

The answer sits at the intersection of three forces that most people never think about: how insurance changes the way we behave, who chooses which plan, and why the cost of everything insurance covers keeps climbing. Once you see these forces clearly, that rising deductible stops looking like corporate greed and starts looking like a predictable outcome of how insurance actually works.

Here's a thought experiment. Imagine you have health insurance with zero out-of-pocket costs. Every doctor visit, every scan, every prescription — completely free to you at the point of use. Would you behave exactly the same as someone paying full price? Probably not. You might visit the doctor for a minor cold. You might request an MRI just to be safe. You wouldn't be acting irrationally — you'd be responding to incentives.

Economists call this moral hazard. It doesn't mean you're immoral. It means that when someone else bears the cost of your decisions, you naturally use more of the thing being covered. Insurance companies figured this out a long time ago. If policyholders don't feel any financial sting when they file a claim, claims multiply — and so do the insurer's costs.

A deductible is the insurer's solution. By making you pay the first few hundred or thousand dollars yourself, they give you a reason to pause and ask: Do I really need this? That question alone filters out a huge number of small, marginal claims. The deductible doesn't punish you — it restores a bit of the cost-awareness that insurance naturally erodes.

Takeaway

Insurance changes behavior by removing the price signal from decisions. Deductibles exist to put a little of that signal back, so you think twice before using the safety net for things you'd normally handle yourself.

Picture two people shopping for health insurance. One visits the doctor twice a year and takes no medications. The other has a chronic condition requiring monthly specialist visits. If both are offered the same low-deductible plan at the same price, the second person gets a bargain and the first person overpays. The healthy person looks at the premium, does some mental math, and walks away.

This is the problem of adverse selection — the tendency for people who expect to use insurance the most to be the ones most eager to buy generous plans. If insurers only attract high-use customers to their low-deductible options, the math breaks. Claims pile up, the insurer raises premiums, and even more healthy people leave. It's a vicious cycle.

High-deductible plans solve this by creating a product that appeals to people who don't expect to need much care. These customers accept a bigger out-of-pocket risk in exchange for lower monthly premiums. They're essentially betting on their own health — and insurers love that bet. By offering a range of deductible levels, insurers let customers sort themselves. The result is a more balanced risk pool and more sustainable pricing for everyone.

Takeaway

Insurance plans aren't one-size-fits-all by accident. Different deductible levels act as a sorting mechanism, separating customers by how much risk they're willing to carry — which keeps the whole system from collapsing under its own weight.

Even if moral hazard and adverse selection were perfectly managed, there's a third force pushing deductibles upward: the raw cost of the things insurance covers. Medical procedures, prescription drugs, auto body repairs, building materials — the prices behind your claims have been climbing steadily for decades. When a hospital charges more for an MRI, your insurer pays more. When auto parts cost more because of supply chain disruptions, your car insurance claim gets bigger.

Insurers have a few options when underlying costs rise. They can raise premiums, but there's a ceiling — push premiums too high and people drop coverage entirely. They can accept thinner profit margins, but that makes the business unsustainable. Or they can shift some of the increased cost to you through a higher deductible.

Raising the deductible is often the least painful move for both sides. Your monthly premium stays manageable, and the insurer protects itself from the compounding effect of more expensive claims. It's a compromise, not a conspiracy. But it means that your deductible isn't just a reflection of your behavior — it's a mirror of what's happening in hospitals, repair shops, and supply chains you never interact with directly.

Takeaway

Your deductible doesn't just reflect insurance company decisions — it reflects the rising cost of everything insurance pays for. When the world behind the claim gets more expensive, some of that cost inevitably lands on your doorstep.

Your rising deductible is three stories in one. It's a behavioral nudge keeping you cost-conscious. It's a sorting tool helping insurers build balanced risk pools. And it's a pressure valve releasing the mounting cost of healthcare, repairs, and materials.

Next time your renewal arrives with a higher number, you'll know exactly which forces pushed it there. Insurance isn't broken — it's just doing math you can now read.