Expenses Flashcards
Expense allocation
Expenses need to be allocated by:
• class of business
• function
Allocation to class of business
Direct and indirect expenses
Allocation to function
The (non commission) expenses can be split:
• initial expenses
• maintenance expenses, including
- renewal expenses
- investment expenses
• termination expenses
Expense allocation
Premiums and provisions should be adequate to cover administration costs, claims handling costs and the fixed expenses of the provider as well as expected claims or benefits arising under the contact
The expense loading can be expressed as:
• Percentage of premium or sum assured
• Percentage of funds under management
• Fixed amount per contract
• Fixed amount per claim or percentage of claim amount
• Combination of the above
Adjustment to pricing expenses loadings
Adjustment made in relation to:
• cross-subsidies
• inflation
• competition