Expense Analysis in Ratemaking and Pricing, [Discussion]

While the title of Roger Wade’s paper, “Expense Analysis in Ratemaking and Pricing”, may suggest a narrow discussion of various techniques for developing final premiums from pure premiums, Mr. Wade, explicitly or implicitly, covers a wide range of expense allocation problems with a very few words. Unfortunately, the paper begins with a brief description of the various techniques utilized in the last step of the expense allocation problem, namely the loading of the pure premium. The latter part of the paper presents a discussion of a technique, presumably used in other industries, concerning the problem of allocating (or not allocating) company overhead expenses to line of business. The entire subject of expense allocation, especially its impact on the price individual consumers pay for insurance, might have been put in better perspective had the order of the paper been reversed.