Conducting Expense Study

Question 1

Conducting Expense Study

Basic Steps of Expense Study

Answer 1

1. Determine scope
2. Collect expense data
3. Check consistency of data with internal and external reports
4. Determine which expenses will be excluded from best estimate expense assumptions
5. Determine expense categories
6. Determine unit expense bases
7. Classify expenses to categories
8. Determine unit expenses
9. Perform reasonability checks

Question 2

Conducting Expense Study

Data Sources for Expense Data

Answer 2

• General ledger or data warehouse = PRIMARY
• Agent/broker/payroll systems
• Sales/financial reporting
• HR systems
• Investment management system

Question 3

Conducting Expense Study

Classification Categories of Expenses

Answer 3

• Directly related to policy activities
  
  • Acquisition
  • Admin
  • Benefit
• Not directly related to policy activities
  
  • Investment
  • Taxes Other than Income Tax
  • Corporate and Overhead Expenses

Question 4

Conducting Expense Study

Allocation Categories of Expenses

Answer 4

• Transaction
• Activity
• Time Study
• Expense
• In-Force
• Staff