Allocated Loss Adjustment Expense Reserves

Allocated loss adjustment expense reserves are a large component of an insurance company’s liabilities. For many lines of business, allocated loss adjustment expenses are growing as a percentage of losses. As a response, many companies are taking actions to control these costs implementing systems to better monitor them. Some companies are re-engineering the entire claim settlement process. In addition, many companies have taken on new attitudes with regard to the legitimacy of claims resulting in significant changes in the amount of allocated loss adjustment expense spent on settling claims. This panel with begin with a review of recent trends in allocated loss adjustment expenses. Examples of efforts to control costs and the consequences will be discussed and evaluated. The panel will also discuss additional data which may result from the implementation of improved monitoring systems, statistics which can be reviewed to assist in detecting changes, the effects of changes on traditional projection methods, and additional methods which may more accurately estimate required allocated loss adjustment expense reserves.