The Theory of the Distribution of the Expenses of Casualty Insurance

In the early days of insurance not a great deal of scientific attention was paid to the amounts that had of necessity to be included in the premiums charged in order to meet the expenses of the underwriter or company incurred in running his or its insurance business. To take care of these expenses rough percentages were added to the estimates of the loss costs. As the science of rate making advanced however, more exact provisions for expenses were made in the rates, and in practically all cases the amounts included for expenses were thought of and included in the premiums as percentages of the premiums charged. There should be mentioned the exceptional case of minimum premiums where one of the causes for setting up minimum charges was (and still is) on account of the recognition of certain costs which were incurred in the actual issuance and carrying of a policy covering even a very small hazard.