The Allocation of Adjusting Expense to Line of Insurance

The task of allocating to lines of insurance the expenses of a multiple-line company is not easy and yet it is imperative that it should be done with reasonable accuracy. There is no item of expense whose distribution to lines is more difficult than the cost of investigation and settlement of claims. Some expenses are incurred only in the field; others are confined to the home office; but here is one which extends to the entire territorial coverage of the company, and requires the services of a large force in the home office. It is not difficult to obtain a fairly correct total of the claim expense of a company and to divide this between field and home office. But when the attempt is made to break this down to lines of insurance, the trouble begins. It is not so difficult to obtain a fairly satisfactory distribution of the home office portion for much of the work there is assigned by lines to separate groups and the expense of supervision can be distributed as an overhead.