What is the consequence if Sola covers all damage claims regardless of circumstances?

When Sola covers all damage claims regardless of circumstances, it significantly impacts the company's financial stability. Insurance operates on the principle of risk management, where premiums collected from policyholders are used to pay out claims. If Sola were to cover all claims without distinction, the frequency and amount of payouts could drastically increase. This would lead to higher costs for the company, necessitating an adjustment in how premiums are calculated.

As claim payouts rise, Sola would likely need to increase their premiums to maintain financial viability. Higher premiums could make insurance less affordable for current and prospective customers. This reduction in affordability could also result in a decrease in the number of policyholders, creating a cycle that further exacerbates financial strain on the company.

In summary, covering all damage claims irrespective of circumstances would compromise the affordability of Sola’s insurance products, leading to sustainability issues for the company.