Expenses Flashcards

1
Q

Expense allocation

A

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

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2
Q

Expense allocation

A

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

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3
Q

Adjustment to pricing expenses loadings

A

Adjustment made in relation to:
• cross-subsidies
• inflation
• competition

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