AFAIK, this is to discourage abuse of the insurance system.
Besides I would bitch more about the junk refurbished phones you will get as replacement from Lockline than the number of incidents allowed per year.
I used to have a junk Sanyo VM 4500/5500 and I had to hold onto it for eternity until I qualified for the $150 rebate off my current PPC-6700. The buttons were not working, the sound awful, and the screen kept blacking out.