Final answer:
The act of an insurance company ending a policy on its anniversary date is known as a non-renewal. Non-renewal is different from cancellation, estoppel, or lapse, each of which has its own specific definition and implications in insurance.
Step-by-step explanation:
When an insurance company terminates a policy on the anniversary date, this is known as non-renewal. A non-renewal occurs when the insurer decides not to renew a policy once it reaches its expiration date. This can happen for a variety of reasons, such as the insured's increased risk profile or a change in the insurer's underwriting policies. It is not the same as cancellation, which can occur at any time during the policy period and typically happens when the policyholder violates the terms of the policy or fails to pay premiums.
Estoppel refers to a legal principle that prevents someone from arguing something contrary to a claim they have previously made if others have relied on the initial claim to their detriment. A lapse occurs when a policyholder fails to pay the premiums on time, leading to the automatic termination of the policy. Raising premiums to cover losses can lead to an adverse selection spiral where only those who are more likely to claim the insurance remain, while lower risks are pushed out due to increased costs, which can be detrimental to the insurance company's financial health.