Budget Variances in Insurance Company Operations

This paper attempts to provide the actuary with a methodology for monitoring the price and quantity of insurance for budgeting purposes. The paper discusses and defines cost accounting concepts and relates them to casualty actuarial work. The technique entitled "Analysis of Budget Variances" is applied to budgeted figures and actual results displayed on a net income statement prepared using the contribution method of allocating expenses. Although this process is shown to have applications for the assignment of responsibility for budget variances, its main contribution is to provide a separation of the variances of components of the net income statement into their price and quantity variances.