Wis. Admin. Code Office of the Commissioner of Insurance Ins 6.30
For the purpose of establishing uniformity in classifications of expenses of fire and marine and casualty and surety insurers recorded in statements and reports filed with and statistics reported to the commissioner of insurance, all such insurers shall observe the instructions set forth below. These instructions shall not apply to single line accident and health insurance companies, assessment accident and health associations, hospital and medical service or indemnity organizations, single line title insurance companies, or town mutual insurance companies.
Include the following expenses when in connection with the investigation and adjustment of policy claims:
Independent Adjusters: Fees and expenses of independent adjusters or settling agents.
Legal: Fees and expenses of lawyers for legal services in the defense, trial, or appeal of suits, or for other legal services.
Bonds: Premium costs of bonds.
Appeal Costs and Expenses: Appeal bond premiums; charges for printing records; charges for printing briefs; court fees incidental to appeals.
General Court Costs and Fees: Entry fees and other court costs, and other fees not includable in Losses. Note: Interest and costs assessed as part of or subsequent to judgment are includable in Losses.
Medical Testimony: Fees and expenses of medical witnesses for attendance or testimony at trials or hearings ("Medical" includes physicians, surgeons, chiropractors, chiropodists, dentists, osteopaths, veterinarians, and hospital representatives).
Expert Witnesses: Fees and expenses of expert witnesses for attendance or testimony at trials or hearings.
Lay Witnesses: Fees and expenses of lay witnesses for attendance or testimony at trials or hearings.
Service of Process: Constables', sheriffs' and other fees and expenses for service of process, including subpoenas.
Transcripts of Testimony: Stenographers' fees and fees for transcripts of testimony.
Medical Examinations: Fees for medical examinations, fees for performing autopsies, fees for impartial examination, x-rays, etc., for the purpose of trial and determining questions of liability. This does not include fees for medical examinations, x-rays, etc., made to determine necessary treatment, or made solely to determine the extent or continuation of disability, or first aid charges, as such fees and charges are includable in Losses.
Miscellaneous: Costs of appraisals, expert examinations, surveys, plans, estimates, photographs, maps, weather reports, detective reports, audits, credit or character reports, watchperson. Charges for hospital records and records of other kinds, notary fees, certified copies of certificates and legal documents. Charges for Claim Adjustment Services by underwriting syndicates, pools and associations.
Exclude:
Compensation to employees (see Salaries).
Expenses of salaried employees (see Travel and Travel Items).
Items includable in Allowances to Managers and Agents.
Payments to State Industrial Commissions (see Taxes, Licenses and Fees).
Payments to claim adjusting organizations except where the expense is billed specifically to individual companies (see Boards, Bureaus and Associations).
Cost of services of medical examiners for underwriting purposes (see Surveys and Underwriting Reports.)
Salvage and subrogation recovery expense, rewards, lost and found advertising, expenses for disposal of salvage. Such expenses shall be deducted from salvage.
Any expenses which by these instructions are includable elsewhere.
Separation of Claim Adjustment Services:
The Statistical Plans filed by certain rating bureaus contain definitions of "Allocated Loss Adjustment Expenses" which exclude for rating purposes certain types of claim adjustment services as defined herein. For the lines of business thus affected, companies which are members of such rating bureaus shall maintain records necessary to the reporting of Claim Adjustment Services-Direct, as defined in Statistical Plans, and other than as defined in Statistical Plans.
Include: Claim adjustment expenses in bills rendered by ceding companies.
Include: Claim adjustment expenses billed to assuming insurers.
Include:
All payments, reimbursements and allowances, on direct writings, computed as a percentage of premiums for production, management or other services to managers, supervising general agents, general agents, regional and district agents, local agents, office agents, brokers, solicitors, and other producers and agents.
Commissions and brokerage to employees when the activities for which the commissions are paid are not a part of their duties as employees.
Exclude:
Compensation to employees except as noted above (see Salaries.)
Allowances, reimbursements and payments not computed as a percentage of premiums (see Allowances to Managers and Agents).
Expenses involved in transactions between insurance companies (see Joint Expenses; Commission and Brokerage-Reinsurance Assumed and Ceded; Expenses for Account of Another; and Income from Special Services).
Contingent commission (see Commission and Brokerage-Contingent).
Fees of investment counsel (see Legal and Auditing).
Expenses includable in Boards, Bureaus and Associations.
Taxes on premiums (see Taxes, Licenses and Fees).
Commission received for special services such as loss adjustment and inspection not related to policies issued by the company (see Income from Special Services).
Commission and allowances of every nature on reinsurance assumed including tax and board allowances and reinsurance brokerage, except contingent commission, shall be included in Commission and Brokerage-Reinsurance Assumed.
Exception: Where commission and allowances under reinsurance assumed take the form of accurate proportions of actual expenses incurred, as in some quota share and pooling agreements, entries shall be made to the actual expenses.
Commission and allowances of every nature on reinsurance ceded including tax and board allowances and reinsurance brokerage, except contingent commission, shall be included in Commission and Brokerage-Reinsurance Ceded.
Exception: Where commission and allowances under reinsurance ceded take the form of accurate proportions of actual expenses incurred, as in some quota share and pooling agreements, entries shall be made to the actual expenses.
Note: Examples Relating to the Treatment of Commission on Reinsurance Assumed and Reinsurance Ceded:
Paid on Written Business | |
Commission and Brokerage-Direct -- | $100,000 |
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Salaries --- | 30,000 |
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Rent and Rent Items ---- | 7,000 |
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Printing and Stationery -- | 7,000 |
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Postage, etc. | 5,000 |
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Surveys and Underwriting Reports -- | 8,000 |
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Total | $157,000 |
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Note: These are not intended to show the complete list of expenses involved but are given only for illustration purposes.
On the statement filed by Company A the commission and allowances by Company B shall be credited as follows:
Paid on Written Business | |
Commission and Brokerage-Reinsurance Ceded---------- | $10,000 |
Salaries --- | 3,000 |
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Rent and Rent Items ---- | 700 |
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Printing and Stationery -- | 700 |
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Postage, etc. | 500 |
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Surveys and Underwriting Reports --- | 800 |
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Total | $15,700 |
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On the statement filed by Company B the commission and allowances made to Company A shall be debited as follows:
Paid on Written Business | |
Commission and Brokerage-Reinsurance Assumed | $10,000 |
Salaries --- | 3,000 |
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Rent and Rent Items | 700 |
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Printing and Stationery | 700 |
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Postage, etc. | 500 |
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Surveys and Underwriting Reports | 800 |
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Total | $15,700 |
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Include:
Contingent or profit commission paid.
Contingent or profit commission received.
Contingent commission to employees when the activities for which the contingent commission is paid are not a part of their duties as employees.
Include:
Policy and membership fees retained by, or paid to, agents.
Policy and membership fees to employees when the activities for which the policy and membership fees are paid are not a part of their duties as employees.
Include:
Net allowances, reimbursements and payments for expenses of every nature, not computed as a percentage of premiums, to managers, agents, brokers, solicitors, and other producers.
Exclude:
Compensation to employees (see Salaries).
Expenses of salaried employees (see Travel and Travel Items).
Expenses of management where one insurance company has been appointed manager for another (see Joint Expenses; Commission and Brokerage-Reinsurance Assumed and Ceded; and Expenses for Account of Another).
Contingent commission (see Commission and Brokerage-Contingent).
Policy and membership fees (see Commission and Brokerage-Policy and Membership Fees).
Expenses in connection with owned real estate (see Real Estate Expenses).
Amounts representing exact reimbursements for Losses; Taxes, Licenses and Fees; Boards, Bureaus and Associations; and Advertising; where only the minimum space required by law is taken.
Amounts representing exact reimbursements for Claim Adjustment Services, Surveys and Underwriting Reports and Audit of Assureds' Records when these services are performed by others than employees of managers, agents, brokers, solicitors or other producers.
Include:
Cost of the following: Services of advertising agents; public relations counsel; space in newspapers, periodicals, billboards, programs, and other publications; circulars, pamphlets, calendars and literature issued for advertising or promotional purposes; drawings, plates, etchings, etc., in connection with advertising; all charges for printing, paper, etc., in bills covering advertising; radio broadcasts; prospect and mailing lists; signs, frames, medals, etc., for agents; souvenirs for general distribution; directory listings; house organs and similar publications distributed to others than employees; and advertising required by law when more than the minimum space required to comply with the law is taken.
Exclude:
Compensation to employees (see Salaries).
Items includable in Travel and Travel Items, Claim Adjustment Services, and Boards, Bureaus and Associations.
Cost of literature, booklets, placards, signs, etc., issued solely for accident and loss prevention (see Surveys and Underwriting Reports).
Advertising and business development expenses allowed, reimbursed or paid to managers, agents, brokers, solicitors, and other producers (see Allowances to Managers and Agents).
Cost of help wanted advertising (see Employee Relations and Welfare).
Cost of advertising in connection with owned real estate (see Real Estate Expenses).
Cost of house organs and similar publications for the use of employees (see Printing and Stationery).
Donations to organized charities (see Miscellaneous).
Cost of souvenirs not generally distributed (see Travel and Travel Items).
Include:
Dues, assessments, fees and charges of: underwriters' boards, rating organizations, statistical agencies, inspection and audit bureaus; underwriters' advisory and service organizations including such organizations as Insurance Executives Association, and Association of Casualty and Surety Companies; accident and loss prevention organizations; claim organizations; underwriting syndicates, pools and associations such as Factory Insurance Association, Oil Insurance Association, assigned risk plans (except Commission and Brokerage; Claim Adjustment Services; and Taxes, Licenses and Fees); and specific payments to boards, bureaus and associations for rate manuals, revisions, fillers, rating plans and experience data.
Exclude:
Cost of inspection, engineering or accident and loss prevention billed specifically to individual companies (see Surveys and Underwriting Reports).
Loss adjustment expenses billed specifically to individual companies (see Claim Adjustment Services).
Allowances under reinsurance contracts for board and bureau expenses (see Commission and Brokerage-Reinsurance Assumed and Ceded).
Payments to State Industrial Commissions (see Taxes, Licenses and Fees).
Payments into State Security Funds (see Taxes, Licenses and Fees).
Commission and Brokerage, Claim Adjustment Services, and Taxes, Licenses and Fees of underwriting syndicates, pools, and associations such as Factory Insurance Associations and Oil Insurance Association.
Cost of survey, credit, moral hazard, character and commercial reports obtained for underwriting purposes (see Surveys and Underwriting Reports).
Cost of commercial reporting services (see Surveys and Underwriting Reports).
Dues and subscriptions to social or civic clubs or affairs (see Travel and Travel Items).
Dues and subscriptions to accounting, legal, actuarial or similar societies and associations (see Travel and Travel Items).
Dues and subscriptions to accounting, legal, actuarial or similar societies and associations (see Travel and Travel Items).
Include cost of the following:
Survey, credit, moral hazard, character and commercial reports obtained for underwriting purposes.
Commercial reporting services.
Appraisals for underwriting purposes.
Fire records.
Inspection, engineering, and accident and loss prevention billed specifically.
Literature, booklets, placards, signs, etc., issued solely for accident and loss prevention.
Maps and corrections.
Services of medical examiners for underwriting purposes.
Exclude:
Compensation to employees (see Salaries).
Expenses of salaried employees (see Travel and Travel Items).
Items includable in Boards, Bureaus and Associations; Claim Adjustment Services; and Allowances to Managers and Agents.
Cost of character or credit reports on employees or applicants for employment (see Employee Relations and Welfare).
Fees for physical examination of employees or applicants for employment (see Employee Relations and Welfare).
Income from inspections, which shall be classified in accordance with the instruction "Income from Special Services".
Include:
Auditing fees and expenses of independent auditors for auditing payrolls and other premium bases.
Exclude:
Compensation to employees (see Salaries).
Expenses of salaried employees (see Travel and Travel Items).
Items includable in Claim Adjustment Services.
Items includable in Allowances to Managers and Agents.
Include:
Salaries, bonus, overtime, contingent compensation, pay while on leave, dismissal allowance, pay while training and other compensation of employees.
Commission and brokerage to employees when the activities for which the commission is paid are a part of their duties as employees.
Exclude: Salaries or wages of janitors, caretakers, maintenance persons and agents paid in connection with owned real estate (see Real Estate Expenses).
Include:
Cost of retirement insurance.
Payments or appropriations to funds irrevocably devoted to the payment of pensions or other employees' benefits.
Pensions or other retirement allowances.
Accident, health and hospitalization insurance for employees. Group life insurance for employees.
Worker's compensation insurance.
Payments to or on behalf of employees under self-insurance.
Any other insurance for the benefit of employees.
Exclude:
Cost of insurance on lives of employees when the company is the beneficiary (such cost shall not appear among expenses, but shall be charged to surplus).
Payments or appropriations to pension funds not irrevocably devoted to the payment of pensions or other employees' benefits (such payments or appropriations shall not appear among expenses).
Items includable in Real Estate Expenses.
All other types of insurance premiums.
Include cost of:
Advertising-help wanted.
Training and welfare of employees.
Physical examinations of employees or applicants for employment.
Character or credit reports on employees or applicants for employment.
Gatherings, outings and entertainment for employees.
Visiting nurse service for or on behalf of employees.
Medical and hospital bills for employees (not covered by 9-a).
Direct payments, other than salaries, to employees for injury and sickness (not covered by 9-a).
Supper money.
Donations to or on behalf of employees.
Food and catering for employees.
Exclude:
Salaries, bonus, overtime, contingent, pay while on leave, dismissal allowances, pay while training and other compensation of employees (see Salaries).
Items includable in Real Estate Expenses.
Cost of house organs and similar publications (see Advertising, and Printing and Stationery).
Include:
Fidelity or surety bonds covering employees and agents.
Burglary, and robbery insurance premiums.
Public liability insurance premiums (Excl. owned Real Estate).
Premiums for insurance on office contents.
Cost of insurance on automobiles.
All other insurance premiums not specifically provided for in other operating accounts.
Exclude:
Items includable in Employee Relations and Welfare.
Items includable in Real Estate Expenses.
Include:
Directors' fees and other compensation of directors for attendance at board or committee meetings.
Other fees, compensation, and expenses paid to directors.
Exclude:
Commission to directors for the production of business (see Commission and Brokerage-Direct).
Include:
Transportation, hotel, meals, postage, telephone, telegraph, express and incidental living expenses of employees while traveling.
Expenses for transfer of employees.
Depreciation, repairs and other operating expenses of automobiles.
Rent of automobiles.
Fees for automobile license plates.
Cost of transportation, hotel, meals and entertainment of guests.
Cost of favors and presents given or extended to others than employees.
Cost of souvenirs not generally distributed.
Dues and subscriptions to social or civic clubs or affairs.
Dues and subscriptions to accounting, legal, actuarial, or similar societies and associations.
Exclude:
Items includable in Salaries; Advertising; Commission and Brokerage; Taxes, Licenses and Fees; Boards, Bureaus and Associations; and Equipment.
Cost of gatherings, outings, etc., and entertainment for employees (see Employee Relations and Welfare).
Travel and travel items paid, reimbursed, or allowed to managers, agents, brokers, solicitors and other producers (see Allowances to Managers and Agents).
Items includable in Real Estate Expenses.
Donations to organized charities (see Miscellaneous).
Cost of souvenirs for general distribution (see Advertising).
Include:
Rent of home office and branch offices.
Rent for space occupied in buildings owned.
Light, heat, power and water charges in leased premises.
Interest, taxes, etc., paid in lieu of rent for leased premises.
Cost of alterations and repairs of leased premises.
Rent of storage, safekeeping and warehouse space.
Rent of safe deposit boxes.
Rent of post office boxes.
Time clock service charges.
Cost of cleaning, towels, ice, water, electric lamp replacements and other expenses incidental to office maintenance.
Exclude:
Compensation to employees (see Salaries).
Rent of furniture, equipment, and office machines (see Equipment).
Rent of automobiles (see Travel and Travel Items).
Rent allowed, reimbursed, or paid to managers, agents, brokers, solicitors and other producers (see Allowances to Managers and Agents).
Items includable in Real Estate Expenses.
Rent income from owned real estate.
Include:
Rent and repairs of furniture, equipment and office machines including printers' equipment, postage machines and punched card equipment.
Depreciation on furniture, equipment and office machines.
Exclude:
Compensation to employees (see Salaries).
Rent, repairs and depreciation of automobiles (see Travel and Travel Items).
Cost of alterations and repairs of leased premises (see Rent and Rent Items).
Equipment expenses allowed, reimbursed or paid to managers, agents, brokers, solicitors and other producers (see Allowances to Managers and Agents).
Items includable in Real Estate Expenses.
Include cost of the following:
Printing, stationery and office supplies such as letterheads, envelopes, paper stock, printed forms or manuals, adding machine tape, carbon paper, binders and posts, photostatic copies, pencils, pens, leads, ink, glue, stamps and stamp pads, stapler, staples, clips and pins, desk top equipment (calendars, trays, etc.), waste baskets, analysis pads, ledgers, journals, minute books, etc.
Policies and policy forms.
Punch cards.
House organs and similar publications for the use of employees.
Books, newspapers and periodicals including investment, tax and legal publications and services.
Exclude:
Compensation to employees (see Salaries).
Specific payments to boards, bureaus and associations for rate manuals, revisions, fillers, rating plans and experience data (see Boards, Bureaus and Associations).
Cost of literature, booklets, placards, signs, etc., issued solely for accident and loss prevention (see Surveys and Underwriting Reports); items includable in Claim Adjustment Services; items includable in Advertising; printers' equipment in company owned printing departments (see Equipment); printing and stationery allowed, reimbursed or paid to managers, agents, brokers, solicitors and other producers (see Allowances to Managers and Agents); house organs and similar publications distributed to others than employees (see Advertising); commercial reporting services (see Surveys and Underwriting Reports); and items includable in Real Estate Expenses.
Include:
Express, freight and cartage.
Postage.
Cost of telephone and telegrams, cables, radiograms and teletype.
Bank charges for collection and exchange.
Exclude:
Compensation to employees (see Salaries).
Rent, repairs and depreciation of postage machines (see Equipment).
Postage, telephone, telegraph and express of employees while traveling (see Travel and Travel Items).
Postage, telephone and telegraph, exchange, and express allowed, reimbursed or paid to managers, agents, brokers, solicitors and other producers (see Allowances to Managers and Agents).
Profits or losses resulting from exchange or remittances to Home Office by a United States Branch. Such profits or losses shall not be included in expenses.
Items includable in Real Estate Expenses.
Rent of post office boxes (see Rent and Rent Items).
Include:
Legal retainers, fees and other legal expenses (except losses and salvage).
Auditing fees of independent auditors for examining records of home and branch offices.
Cost of services of tax experts.
Fees of investment counsel.
Registrar fees.
Custodian fees.
Trustees' fees.
Transfer agent fees.
Fees and expenses of others than employees, for collecting balances.
Notary fees.
Exclude:
Compensation to employees (see Salaries).
Expenses of salaried employees (see Travel and Travel Items).
Items includable in Claim Adjustment Services.
Items includable in Real Estate Expenses.
Cost of auditing of assureds' records (see Audit of Assureds' Records).
Include:
State, county and municipal taxes, licenses and fees based upon premiums.
Fire Patrol assessments.
Payments to State Industrial (or other) Commissions for administration of Worker's Compensation or other State Benefit Acts (including assessments for administering Financial Responsibility Laws) regardless of basis of assessment.
Net payments to State Security Funds, Reopened Case Funds, Second Injury Funds and other State Funds, when construed by the company as operating expenses, regardless of basis of assessment.
Exclude:
Allowances for taxes under reinsurance contracts (see Commission and Brokerage-Reinsurance Assumed and Ceded).
Include:
Agents' Licenses.
Certificates of authority, compliance, deposit, etc.
Filing fees.
Fees and expenses of examination by insurance departments or other governmental agencies.
Exclude:
Items includable in Claim Adjustment Services.
Include:
Old age benefit taxes.
Unemployment insurance taxes.
Exclude:
Payroll taxes includable in Real Estate Taxes.
Include:
Qualifying bond premiums.
Statement publication fees.
Advertising required by law.
Personal property taxes.
State income taxes.
Capital stock taxes.
Business or corporation licenses or fees (not includable under a. or b. of this subparagraph).
Marine profits taxes.
Documentary stamps on reinsurance.
Any other taxes not assignable under a., b., and c. of this subparagraph and not otherwise excluded.
Exclude:
Cost of advertising required by law where more than minimum space required to comply with the law is taken. Such expense shall be included in Advertising.
Real estate taxes, licenses and fees (see Real Estate Taxes). Items includable in Claim Adjustment Services.
Fees for automobile license plates (see Travel and Travel Items)
Federal and foreign income tax.
Sales taxes, etc., included on invoices of vendors. Such taxes are to follow allocation of cost of items purchased.
Include:
Salaries, wages and other compensation of janitors, caretakers, maintenance persons and agents paid in connection with owned real estate.
Cost of operating and maintaining owned real estate.
Cost of insurance in connection with owned real estate.
Cost of advertising in connection with owned real estate.
Include:
Taxes, licenses and fees on owned real estate.
Include: Expenses not listed as includable in other operating expense classifications, and not analogous thereto. Specifically, the following shall be included:
Cost of tabulating service when such service is rendered by outside organizations.
Amounts received and handled in accordance with the instruction "Income from Special Services".
Donations to organized charities.
Differences between actual amounts paid, and amounts apportioned in accordance with the instruction "Joint Expenses".
Whenever personnel or facilities are used in common by two or more companies, or whenever the personnel or facilities of one company are used in the activities of two or more companies, the expenses involved shall be apportioned in accordance with the regulations relating to Joint Expenses, and such apportioned expenses shall be allocated by each company to the same operating expense classifications as if the expenses had been borne wholly. Any difference between the actual amount paid, and the amount of such apportioned expenses shall be included in the operating expense classification "Miscellaneous".
This instruction does not apply to the allocation of the following, which are covered by separate instructions herein:
Reinsurance commission and allowances (see Commission and Brokerage-Reinsurance Assumed and Ceded).
Commission and brokerage paid to managers and agents (see Commission and Brokerage-Direct).
Allowances to managers and agents (see Allowances to Managers and Agents).
Expenses allocable in accordance with the instruction "Income from Special Services".
Whenever expenses are paid by one company for account of another, the payments shall not appear among the expenses reported by the former, and shall be included by the latter in the same expense classifications as if originally paid by it.
Whenever an insurance company receives compensation for sales or services, such as loss adjustment or inspection not related to policies written by the company, and such compensation is not calculated as a joint expense reimbursement, the amount thereof shall be included in the operating expense classification "Miscellaneous". Where an insurance company pays the compensation, allocation shall be made to the expense classification dictated by the nature of the expense.
This instruction is of limited applicability and does not apply to the allocation of the following, which are covered by separate instructions herein:
Reinsurance commission and allowances (see Commission and Brokerage-Reinsurance Assumed and Ceded).
Expenses incurred for the benefit of companies in the same group or fleet. Such expenses are covered by the instruction "Joint Expenses".
The lists of expenses includable in the operating expense classifications are representative and do not exclude analogous items which are omitted from the lists.
INDEX to s. Ins 6.30(1)
The references are to subparagraphs in paragraph (b) of subsection (1).
Accident and loss prevention billed specifically - 6
Accident and loss prevention literature - 6
Accident and loss prevention organizations - 5
Accident insurance for employees - 9-a
Accounting societies, dues and subscriptions to - 12
Actuarial societies, dues and subscriptions to - 12
Adding machine tape - 15
Adjusters - 1-a
Adjustment services - 1
Advertising, operating expense classification - 4
Advertising, help wanted - 9-b
Advertising in connection with owned real estate - 19
Advertising required by law when only the minimum space required by law is taken - 18-d
Advertising required by law when more than the minimum space required by law is taken - 4
Advisory organizations - 5
Agents' allowances, reimbursements and payments computed as percentage of premiums - 2-a
Agents' allowances, reimbursements and payments not computed as percentage of premiums - 3
Agents' licenses - 18-b
Allocated loss adjustment expenses - 1-a
Allowances to managers and agents, operating expense classification - 3
Alterations and repairs of leased premises - 13
Analogous items - 22-d
Analysis pads - 15
Appeal costs relating to claim adjustment - 1-a
Appraisals relating to claim adjustment - 1-a
Assessments for fire patrol - 18-a
Assessments of boards, bureaus and associations - 5
Associations, underwriting - 5
Attorneys' fees relating to claim adjustment - 1-a
Attorneys' fees - 17
Audit bureaus - 5
Audit of assureds' records, operating expense classification - 7
Auditing relating to claim adjustment - 1-a
Auditing fees of independent auditors for auditing payrolls and other premium bases - 7
Auditing fees of independent auditors for examining records of home and branch offices - 17
Automobiles, depreciation, rent, repairs and expenses of - 12; insurance of - 10
Automobile license plates - 12
Bank charges for collection and exchange - 16
Billboards - 4
Binders and posts - 15
Board allowances, reinsurance - 2-b, 2-c
Boards, bureaus and associations, operating expense classification - 5
Bonds covering employees - 10
Bonds, premium cost, relating to claim adjustment - 1-a
Bonus to employees - 8
Booklets for accident and loss prevention - 6
Books, newspapers and periodicals including investment, tax and legal publications and services - 15
Branch office rent - 13
Broadcasts - 4
Brokerage to employees when the activities for which the commissions are paid are not a part of their duties as employees - 2-a
Brokerage to employees when the activities for which the commissions are paid are a part of their duties as employees - 8
Brokerage, direct - 2-a
Brokerage, reinsurance assumed - 2-b
Brokerage, reinsurance ceded - 2-c
Brokers' allowances, reimbursements and payments computed as a percentage of premiums - 2-a
Brokers' allowances, reimbursements and payments not computed as a percentage of premiums - 3
Bureaus - 5
Burglary and robbery insurance premiums - 10
Business licenses - 18-a, 18-b, and 18-d
Cables - 16
Calendars for advertising purposes - 4
Capital stock taxes - 18-d
Carbon paper - 15
Cartage, express and freight - 16
Catering for employees - 9-b
Certificates of compliance - 18-b
Charges for claim adjustment services of underwriting pools, syndicates and associations - 1-a
Character or credit reports relating to claim adjustment - 1-a
Character reports for underwriting purposes - 6
Character reports on employees - 9-b
Charities, contributions to - 21
Circulars, advertising in - 4
Civic clubs, dues and subscriptions to - 12
Claim adjustment services, operating expense classification - 1
Claim adjustment services, separation of - 1-a
Claim organizations - 5
Cleaning costs - 13
Collection charges of banks - 16
Collection fees and expenses of others than employees for collecting balances - 17
Commercial reports - 6
Commercial reporting services - 6
Commission and brokerage, operating expense classification - 2
Commission and brokerage, direct - 2-a
Commission and brokerage, reinsurance assumed - 2-b
Commission and brokerage, reinsurance ceded - 2-c
Commission and brokerage, tax and board allowances - 2-b, 2-c
Commission and brokerage, reinsurance brokerage - 2-b, 2-c
Commission and brokerage, contingent or profit - 2-d
Commission and brokerage, policy and membership fees - 2-e
Commission to employees when the activities for which the commissions are paid are a part of their duties as employees - 8
Commission under quota share and pool agreements - 2-b, 2-c
Compensation insurance - 9-a
Compensation to janitors, caretakers, etc., paid in connection with owned real estate - 19
Compensation to employees - 8
Contingent commission - 2-d
Contributions to employees - 9-b
Contributions to organized charities - 21
Copies of certificates and documents relating to claim adjustment - 1-a
Corporation licenses - 18-a, 18-b, and 18-d
Court costs relating to claim adjustment - 1-a
County and municipal taxes, licenses and fees - 18-a
Credit or character reports relating to claim adjustment - 1-a
Credit or character reports for underwriting purposes - 6
Credit or character reports on employees or applicants for employment - 9-b
Custodian fees - 17
Depreciation of automobiles - 12
Depreciation of furniture, equipment and office machines - 14
Desk top equipment - 15
Detective reports relating to claim adjustment - 1-a
Direct, claim adjustment services - 1-a
Direct, commission and brokerage - 2-a
Directors' fees, operating expense classification - 11
Directory listings - 4
Dismissal allowances to employees - 8
District agents, payments to - 2-a and 3
Documentary stamps on reinsurance - 18-d
Documents relating to claim adjustment - 1-a
Donations to employees - 9-b
Donations to organized charities - 21
Drawings in connection with advertising - 4
Dues and subscriptions to accounting, legal, actuarial or similar societies - 12
Dues to social clubs or affairs - 12
Dues to boards, bureaus and associations - 5
Electric lamp replacements - 13
Employees, commission and brokerage to - 2 and 8
Employees' expenses while traveling - 12
Employee relations and welfare, operating expense classification - 9
Engineering billed specifically - 6
Entertainment for employees - 9-b
Entertainment of guests - 12
Entry fees relating to claim adjustment - 1-a
Envelopes - 15
Equipment, operating expense classification - 14
Equipment, rent, repairs and depreciation of - 14; insurance of - 10
Etchings in connection with advertising - 4
Examinations, medical, relating to claim adjustment - 1-a
Exchange - 16
Expenses for account of another - 22-b
Experience data - 5
Expert witnesses relating to claim adjustment - 1-a
Express, freight and cartage - 16
Express, freight and cartage of employees while traveling - 12
Favors and presents given to others than employees - 12
Fees and expenses of others than employees for collecting balances - 17
Fees for automobile license plates - 12
Fees for insurance department examinations - 18-b
Fees, medical, relating to claim adjustment - 1-a
Fees, notary, relating to claim adjustment - 1-a
Fees, notary - 17
Fees of boards, bureaus and associations - 5
Fees on owned real estate - 20
Fees paid to directors - 11
Fees, taxes and licenses - 18
Fidelity bonds covering employees - 10
Filing fees - 18-b
Fire patrol assessments - 18-a
Fire records - 6
Food for employees - 9-b
Frames for agents - 4
Freight, express and cartage - 16
Furniture, depreciation, rent and repairs of - 14; insurance of - 10
Gatherings for employees - 9-b
General agents, payments to - 2-a and 3
Gifts to employees - 9-b
Glue - 15
Group life insurance for employees - 9-a
Guests, cost of transportation, hotel, meals and entertainment - 12
Heat, light, power and water charges in leased premises - 13
Health insurance for employees - 9-a
Help wanted advertising - 9-b
Home office rent - 13
Hospital bills of employees - 9-b
Hospital records relating to claim adjustment - 1-a
Hospitalization insurance for employees - 9-a
Hotel expenses for guests - 12
Hotel expenses for employees while traveling - 12
House organs distributed to others than employees - 4
House organs for use of employees - 15
Ice - 13
Income from special services - 21 and 22-c
Income taxes, state - 18-d
Independent adjusters - 1-a
Industrial commissions - 18-a
Injury to payments to employees - 9
Ink - 15
Inspection billed specifically - 6
Inspection bureaus - 5
Insurance, accident - 9
Insurance, automobile - 10
Insurance, burglary and robbery - 10
Insurance department examinations - 18-b
Insurance department licenses and fees - 18-b
Insurance, health - 9-a
Insurance, in connection with owned real estate - 19
Insurance, on office contents - 10
Insurance, operating expense classification - 10
Insurance, public liability - 10
Insurance, retirement - 9-a
Insurance, worker's compensation - 9-a
Interest, taxes, etc., paid in lieu of rent for leased premises - 13
Investment counsel fees - 17
Joint expenses - 21 and 22-a
Journals - 15
Lawyers' expenses relating to claim adjustment - 1-a
Lawyers' fees and expenses - 17
Leased premises, cost of alterations and repairs - 13
Leased premises, interest, taxes, etc., paid in lieu of rent - 13
Leased premises, light, heat, power and water charges - 13
Leave pay for employees - 8
Ledgers - 15
Legal and auditing, operating expense classification - 17
Legal expenses relating to claim adjustment - 1-a
Legal expenses - 17
Legal societies, dues and subscriptions to - 12
Letterheads - 15
Licenses on owned real estate - 20
Licenses, taxes and fees - 18
License plates, automobile - 12
Life insurance for employees - 9-a
Light, heat, power and water charges in leased premises - 13
Literature for accident and loss prevention - 6
Literature for advertising purposes - 4
Local agents, payments to - 2-a and 3
Local insurance taxes - 18-a
Loss adjustment expenses - 1
Loss prevention billed specifically - 6
Loss prevention literature - 6
Loss prevention organizations - 5
Machines, depreciation, rent and repairs of - 14; insurance of - 10
Mailing lists - 4
Maintaining owned real estate - 19
Managers, payments to - 2-a and 3
Maps relating to claim adjustment - 1-a
Maps and corrections - 6
Marine profits taxes - 18-d
Meals for employees while traveling - 12
Meals for guests - 12
Medals for agents - 4
Medical bills of employees - 9-b
Medical examinations relating to claim adjustment - 1-a
Medical examiners, services of, for underwriting purposes - 6
Medical testimony relating to claim adjustment - 1-a
Membership and policy fees - 2-e
Minute books - 15
Miscellaneous, operating expense classification - 21
Moral hazard, reports - 6
Municipal and county taxes, licenses and fees - 18-a
Newspapers, advertising in - 4
Newspapers, books, periodicals, etc., including investment, tax and legal publications and services - 15
Notary fees - 17
Notary fees relating to claim adjustment - 1-a
Nurse service to employees - 9-b
Office agents, payment to - 2-a and 3
Office machines, depreciation, rent and repairs of - 14; insurance of - 10
Office maintenance expense - 13
Office rent - 13
Office supplies - 15
Old age benefit taxes - 18-c
Operating expenses of owned real estate - 19
Overtime - 8
Outings for employees - 9-b
Pamphlets, advertising in - 4
Paper in bills covering advertising - 4
Paper stock - 15
Payroll audit - 7
Payroll taxes - 18-c
Pencils and pens - 15
Pensions - 9-a
Periodicals, advertising in - 4
Periodicals, newspapers, books, etc., including investment, tax and legal publications and services - 15
Personal property taxes - 18-d
Photographs relating to claim adjustment - 1-a
Photostatic copies - 15
Physical examinations of employees - 9-b
Pins - 15
Placards for accident and loss prevention - 6
Plates in connection with advertising - 4
Policies and policy forms - 15
Policy and membership fees - 2-e
Policy claims, investigation and adjustment - 1-a
Pools and associations - 5
Pool and quota share agreements - 2-b and 2-c
Post office boxes, rent of - 13
Postage machines - 14
Postage expenses incurred by employees while traveling - 12
Postage, telephone, telegraph, exchange and express, operating expense classification - 16
Power, light, heat and water charges in leased premises - 13
Premium cost of bonds relating to claim adjustment - 1-a
Premium taxes, licenses and fees - 18-a
Premiums for insurance on office contents - 10
Presents and favors given to others than employees - 12
Printed forms - 15
Printers' equipment, rent, repairs and depreciation of - 14; insurance of - 10
Printing and stationery, operating expense classification - 15
Printing and stationery relating to claim adjustment - 1-a
Printing in bills covering advertising - 4
Process, service of, relating to claim adjustment - 1-a
Producers, payments to - 2-a and 3
Profit commission - 2-d
Programs, advertising in - 4
Prospect lists - 4
Public liability insurance premiums - 10
Public relations counsel - 4
Publication fees - 18-d
Publications, advertising in - 4
Publications such as house organs, for use of employees - 15
Punch cards - 15
Punched card equipment - 14
Punched card services - 21
Qualifying bond premiums - 18-d
Quota share and pool agreements - 2-b and 2-c
Radio broadcasts - 4
Radiograms - 16
Rate manual - 5
Rating organizations - 5
Rating plans - 5
Real estate expenses, operating expense classification - 19
Real estate taxes, operating expense classification - 20
Regional agents, payments to - 2-a and 3
Registrar fees - 17
Reinsurance assumed, claim adjustment services - 1-b
Reinsurance assumed, commission and brokerage - 2-b
Reinsurance ceded, claim adjustment services - 1-c
Reinsurance ceded, commission and brokerage - 2-c
Rent and rent items, operating expense classification - 13
Rent of furniture, equipment and office machines - 14
Rent of automobiles - 12
Reopened case funds - 18-a
Repairs and alterations in leased premises - 13
Repairs of automobiles - 12
Repairs of furniture, equipment and office machines - 14
Retirement allowances - 9-a
Retirement insurance - 9-a
Safe deposit boxes, rent of - 13
Safekeeping, storage and warehouse space, rent of - 13
Salaries, operating expense classification - 8
Salaries paid in connection with owned real estate - 19
Second injury funds - 18-a
Security funds - 18-a
Service organizations - 5
Services, tabulating, rendered by outside organizations - 21
Sickness payments to employees - 9
Signs for accident and loss prevention - 6
Signs for agents - 4
Social clubs, dues and subscriptions to - 12
Solicitors, payment to - 2-a and 3
Souvenirs for general distribution - 4
Souvenirs not generally distributed - 12
Space occupied in buildings owned - 13
Stamp pads - 15
Staples and staplers - 15
State income taxes - 18-d
State industrial commissions - 18-a
State insurance taxes - 18-a
State licenses and fees - 18-b
State premium taxes, licenses and fees - 18-a
State security funds - 18-a
Statement publication fees - 18-d
Stationery - 15
Statistical agencies - 5
Statistical services - 21
Stenographers' fees relating to claim adjustment - 1-a
Stock taxes - 18-d
Storage, safekeeping and warehouse space, rent of - 13
Subpoenas relating to claim adjustment - 1-a
Subscriptions to accounting, legal, actuarial and similar societies - 12
Subscriptions to social or civic clubs or affairs - 12
Supper money - 9-b
Surety bonds covering employees - 10
Survey reports relating to claim adjustment - 1-a
Surveys and underwriting reports, operating expense classification - 6
Syndicates, underwriting - 5
Tabulating services - 21
Tax allowances, reinsurance - 2-b and 2-c
Tax expert services - 17
Taxes, interest, etc., paid in lieu of rent for leased premises - 13
Taxes, licenses and fees, operating expense classification - 18
Taxes, real estate - 20
Telephone and telegraph - 16
Telephone and telegraph expenses of employees while traveling - 12
Teletype - 16
Time clock service charges - 13
Towels - 13
Training of employees - 9-b
Training pay of employees - 8
Transcripts of testimony relating to claim adjustment - 1-a
Transfer agents' fees - 17
Transfer of employees - 12
Transfer taxes - 18-d
Transportation of guests - 12
Transportation of employees - 12
Travel and Travel Items, operating expense classification - 12
Traveling expenses of employees - 12
Trustees' fees - 17
Underwriters' boards - 5
Underwriting reports - 6
Underwriting syndicates - 5
Unemployment insurance taxes - 18-c
Visiting nurse service - 9-b
Wages paid in connection with owned real estate - 19
Warehouse, storage and safekeeping space, rent of - 13
Waste baskets - 15
Water, light, heat and power in leased premises - 13
Watchperson expenses relating to claim adjustment - 1-a
Weather reports relating to claim adjustment - 1-a
Welfare of employees - 9-b
Witnesses relating to claim adjustment - 1-a
Worker's compensation insurance - 9-a
Expenses to be Allocated to Companies | Bases of Allocation to Companies |
Advertising | Premiums |
Boards, Bureaus and Associations | Special Studies |
Surveys and Underwriting Reports | Special Studies |
Audit of Assureds' Records | Special Studies |
Salaries | See Special Instructions Relating to the Allocation of Salaries and Other Expenses (s. Ins 6.30(5) ) |
Employee Relations & Welfare | Overhead on Salaries |
Insurance | Overhead on Salaries |
Travel and Travel Items | Special Studies |
Rent & Rent Items | Overhead on Salaries |
Equipment | Overhead on Salaries |
Printing and Stationery | Overhead on Salaries |
Postage, Telephone and Telegraph, Exchange and Express | Overhead on Salaries |
Legal and Auditing | Special Studies |
Payroll Taxes | Overhead on Salaries |
Miscellaneous | Special Studies |
The term Premiums used as basis of allocation means the allocation of expenses shall follow the percentages of applicable premiums.
The term Special Studies used as a basis of allocation means that expenses shall be analyzed and bases of allocation applied as dictated by that analysis.
The term Overhead on Salaries used as a basis of allocation means that the allocation of expenses shall follow the percentages of the applicable salaries allocation.
For those operating expense classifications permitting the basis, Overhead on Salaries or Premiums, any other basis of allocation may be adopted which yields more accurate results. The bases Overhead on Salaries and Premiums shall not be used if clearly inappropriate.
In making any allocations of Joint Expenses, companies shall observe the General Instructions Regarding Allocation Bases (see s. Ins 6.30(5) (a) 2. ).
The methods followed in allocating Joint Expenses shall be described, kept and supported as set forth under Detail of Allocation Bases (See s. Ins 6.30(5) (a) 3-c).
The effects of the application, to each operating expense classification, of all bases of allocation shall be shown on records kept in clear and legible form. Such records shall be readily available for examination.
It is permissible to apportion expenses between companies during the year on the basis of methods and procedures other than those prescribed herein, provided allocations of corrected amounts, calculated in accordance with these instructions, are made in time for entry in the Annual Statement.
Expenses reported in the operating expense classifications shall be allocated to the following expense groups:
Investment Expenses.
Loss Adjustment Expenses.
Acquisition, Field Supervision and Collection Expenses.
Taxes.
General Expenses.
The composition of each expense group shall be as follows:
Investment Expenses shall comprise all expenses incurred wholly or partially in connection with the investing of funds and the obtaining of investment income, including related expenses incurred in the following activities: initiating or handling orders and recommendations; doing research; pricing; appraising and valuing; paying and receiving; entering and keeping general and detail records; safe keeping; collecting, recording, calculating and accruing investment income; general clerical, secretarial, office maintenance, supervisory and executive duties; handling personnel, supplies, mail, etc.; and all other activities reasonably attributable to the investing of funds and the obtaining of investment income.
Loss Adjustment Expenses shall comprise all expenses incurred wholly or partially in connection with the adjustment and recording of policy claims, including the totals of the operating expense classification, Claim Adjustment Services: the types of expenses included in Claim Adjustment Services, when the activities resulting in such types of expenses are performed by employees; and including related expenses incurred in the following activities: estimating amounts of claims; paying and receiving; entering and keeping general and detail records; general clerical, secretarial, office maintenance, supervisory and executive duties; handling personnel, supplies, mail, etc.; and all other activities reasonably attributable to the adjustment and recording of policy claims in connection with claims reported, paid, and outstanding, and reinsurance thereon.
Acquisition, Field Supervision and Collection Expenses shall comprise all expenses incurred wholly or partially in the following activities:
Soliciting and procuring business and developing the sales field.
Writing policy contracts, and checking and directly supervising the work of policy writers.
Receiving and paying of premiums and commissions; entering into or setting up records of premiums and commissions receivable and payable for collection purposes; balancing and maintaining such records; corresponding with and visiting insureds and producers for the purpose of collecting premiums or adjusting differences; checking current accounts from producers; auditing of records of delinquent agents; and services of collection agencies. Do not include activities offices within the company.
Compiling and distributing expiration lists, notices of premiums due, lists of premiums or premium balances receivable and payable, contingent and other commission statements, production statements for acquisition and field supervision purposes, and similar data.
Maintaining good will of insureds and producers; activities of field personnel; contact work relating to acquisition, field supervision and collection; making contracts and agreements with producers; and activities in connection with agency appointments and replacements. Do not include: inspections of risks when carried on by personnel employed by the insurance company, engaged full time in physical inspection of risks and activities directly related thereto; audits for the purpose of premium determination; and activities in connection with the adjustment of policy claims.
Rendering service to agents and other producers, such as providing office space, personnel, telephone, etc., and obtaining agents' licenses.
Do not include fees paid for agents' licenses.
Advertising and publicity of every nature related to acquisition, field supervision and collection. In addition to applicable salaries, etc., include the entire amount shown in the operating expense classification, Advertising.
Miscellaneous activities of agents, brokers and producers other than employees, when performed by them: inspections; quoting premiums; signing policies; examining and mailing policies, applications and daily reports; compiling figures for current accounts; correspondence and sundry bookkeeping and clerical work.
Other activities reasonably attributable to those operations listed above, such as: keeping general and detail records; paying and receiving; general clerical, secretarial, office maintenance, supervisory and executive work; and handling personnel, supplies, mail, etc.
Commission and Allowances: When the whole or a part of any amount in the operating expense classifications Commission and Brokerage-Direct, and Allowances to Managers and Agents is paid specifically for services other than those set forth under Acquisition, Field Supervision and Collection Expenses, and when such services are not duplicated or otherwise compensated by the company, the amount thereof shall be allocated to expense groups other than Acquisition, Field Supervision and Collection, and such allocations shall be justified by detailed statements and data calculated and prepared in accordance with the methods described in these instructions showing amounts of expenditures properly allocated to expense groups and lines of business.
When Allowances to Managers and Agents represent a division of expenses shared with other companies, the aforementioned statements and data shall show the division of such shared expenses calculated and prepared in accordance with the methods prescribed in these instructions.
The calculation and preparation of the aforementioned statements and data shall be subject to verification and audit by insurance department personnel.
The instructions under the heading Commission and Allowances do not apply to Commission and Brokerage-Reinsurance Assumed, or Commission and Brokerage-Reinsurance Ceded.
Taxes shall comprise the totals of the operating expense classification Taxes, Licenses and Fees.
General Expenses shall comprise all expenses not assignable by these instructions to other expense groups.
Expenses to be Allocated to Expense Groups | Allocation to Expense Groups |
Claim Adjustment Services: | |
Direct | Loss Adjustment Expenses |
Reinsurance Assumed | Loss Adjustment Expenses |
Reinsurance Ceded | Loss Adjustment Expenses |
Commission and Brokerage: | |
Direct | See Commission and Allowances (s. Ins 6.30(3) (a) 2-c) |
Reinsurance Assumed | Acquisition, Field Supervision and Collection Expenses |
Reinsurance Ceded | Acquisition, Field Supervision and Collection Expenses |
Contingent-Net | Acquisition, Field Supervision and Collection Expenses |
Policy and Membership Fees | Acquisition, Field Supervision and Collection Expenses |
Allowances to Managers and Agents | See Commission and Allowances (s. Ins 6.30(3) (a) 2-c) |
Advertising | Acquisition, Field Supervision and Collection Expenses |
Boards, Bureaus and Associations | General Expenses |
Surveys and Underwriting Reports | General Expenses |
Audit of Assureds' Records | General Expenses |
Salaries | See Special Instructions Relating to the Allocation of Salaries and Other Expenses (s. Ins 6.30(5) ) |
Employee Relations and Welfare | Overhead on Salaries |
Insurance | Overhead on Salaries |
Directors' Fees | Overhead on Salaries |
Travel and Travel Items | Special Studies |
Rent and Rent Items | Overhead on Salaries |
Equipment | Overhead on Salaries |
Printing and Stationery | Overhead on Salaries |
Postage, Telephone and Telegraph, Exchange and Express | Overhead on Salaries |
Legal and Auditing | Special Studies |
Taxes, Licenses and Fees | Taxes |
Real Estate Expenses | Investment Expenses |
Real Estate Taxes | Investment Expenses |
Income from Special Services | Special Studies |
Miscellaneous | Special Studies |
For definitions of the terms Overhead on Salaries and Special Studies, see s. Ins 6.30(2) (a) 1. b.
For those operating expense classifications permitting the basis Overhead on Salaries, any other basis of allocation may be adopted which yields more accurate results. The basis Overhead on Salaries shall not be used if clearly inappropriate.
In making any allocations to expense groups, companies shall observe the General Instructions Regarding Allocation Bases (see s. Ins 6.30(5) (a) 2. ).
The methods followed in allocating to expense groups shall be described, kept and supported as set forth under Detail of Allocation Bases (see s. Ins 6.30(5) (a) 3. c.).
The effects of the application to each operating expense classification of all bases of allocation shall be shown on records kept in clear and legible form. Such records shall be readily available for examination.
The lines of business for allocation of expenses shall be the following:
Fire and Allied Lines:
Fire
Extended Coverage
Other
Homeowners Multiple Peril
Commercial Multiple Peril
Ocean Marine
Inland Marine
Automobile Liability:
Bodily Injury (including medical payments coverage)
Property Damage
Automobile Physical Damage:
Fire, Theft and Comprehensive
Collision
Worker's Compensation
Liability Other than Automobile:
Bodily Injury
Property Damage
Fidelity
Surety
Glass
Burglary and Theft
Individual Accident and Health:
Accident only
Accident and Health
Hospital and Medical Expense
Group Accident and Health Boiler and Machinery
All bases employed in such allocations shall be applicable and appropriate to the expense group of which such expense is a part.
Example - Expenses which are allocated to lines of business as an Overhead on Salaries shall be calculated in relation only to the salaries included in the same expense group.
Expenses Included in the Expense Group, Loss Adjustment Expenses | Bases of Allocation to Lines of Business |
Claim Adjustment Services: | |
Direct | Actual |
Reinsurance Assumed | Actual |
Reinsurance Ceded | Actual |
Commission and Brokerage -Direct | See Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Allowances to Managers and Agents | See Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Salaries | See Special Instructions Relating to the Allocation of Salaries and Other Expenses (s. Ins 6.30(5) ) |
Employee Relations and Welfare | Overhead on Salaries |
Insurance | Overhead on Salaries |
Directors' Fees | Overhead on Salaries |
Travel and Travel Items | Special Studies |
Rent and Rent Items | Overhead on Salaries |
Equipment | Overhead on Salaries |
Printing and Stationery | Overhead on Salaries |
Postage, Telephone and Telegraph, Exchange and Express | Overhead on Salaries |
Legal and Auditing | Special Studies |
Income from Special Services | Special Studies |
Miscellaneous | Special Studies |
Expenses Included in the Expense Group, Acquisition, Field Supervision and Collection Expenses | Bases of Allocation to Lines of Business |
Commission and Brokerage: | |
Direct | Actual, but Subject to Instructions under Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Reinsurance Assumed | Actual |
Reinsurance Ceded | Actual |
Contingent-Net | Special Studies |
Policy and Membership Fees | Actual |
Allowances to Managers and Agents | Special Studies, but Subject to Instructions under Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Advertising | Premiums |
Salaries | See Special Instructions Relating to the Allocation of Salaries and Other Expenses (s. Ins 6.30(5) ) |
Employee Relations and Welfare | Overhead on Salaries |
Insurance | Overhead on Salaries |
Directors' Fees | Overhead on Salaries |
Travel and Travel Items | Special Studies |
Rent and Rent Items | Overhead on Salaries |
Equipment | Overhead on Salaries |
Printing and Stationery | Overhead on Salaries |
Postage, Telephone and Telegraph, Exchange and Express | Overhead on Salaries |
Legal and Auditing | Special Studies |
Income from Special Services | Special Studies |
Miscellaneous | Special Studies |
Expenses Included in the Expense Group, General Expenses | Bases of Allocation to Lines of Business |
Commission and Brokerage-Direct | See Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Allowances to Managers and Agents | See Commission and Allowances (s. Ins 6.30(3) (a) 2. c.) |
Boards, Bureaus and Associations | Special Studies |
Surveys and Underwriting Reports | Special Studies |
Audit of Assureds' Records | Special Studies |
Salaries | See Special Instructions Relating to the Allocation of Salaries and Other Expenses (s. Ins 6.30(5) ) |
Employee Relations and Welfare | Overhead on Salaries |
Insurance | Overhead on Salaries |
Directors' Fees | Overhead on Salaries |
Travel and Travel Items | Special Studies |
Rent and Rent Items | Overhead on Salaries |
Equipment | Overhead on Salaries |
Printing and Stationery | Overhead on Salaries |
Postage, Telephone and Telegraph, Exchange and Express | Overhead on Salaries |
Legal and Auditing | Special Studies |
Income from Special Services | Special Studies |
Miscellaneous | Special Studies |
Expenses Included in the Expense Group, Taxes | Bases of Allocation to Lines of Business |
Taxes, Licenses and Fees: | |
State and Local Insurance Taxes | Special Studies |
Insurance Department Licenses and Fees | Special Studies |
Payroll Taxes | Overhead on Salaries |
All other (excluding Federal and foreign income and real estate) | Special Studies |
The term Actual means that the expenses are susceptible of direct and accurate allocation, and companies shall allocate directly to lines of business and shall not employ any apportionments or estimations.
For definitions of the terms Special Studies, Premiums, and Overhead on Salaries, see s. Ins 6.30(2) (a) 1. b.
For those expense classifications permitting the basis Overhead on Salaries or Premiums, any other basis of allocation may be adopted which yields more accurate results. The bases Overhead on Salaries and Premiums shall not be used if clearly inappropriate.
In making any allocations to lines of business, companies shall observe the General Instructions Regarding Allocation Bases (see s. Ins 6.30(5) (a) 2. ).
The methods followed in allocating to lines of business shall be described, kept and supported as set forth under Detail of Allocation Bases (see s. Ins 6.30(5) (a) 3. c.).
The effects of the application to each operating expense classification of all bases of allocation shall be shown on records kept in clear and legible form. Such records shall be readily available for examination.
Wherever possible, salaries of individuals or similarly employed groups shall be allocated direct to companies, expense groups, and lines of business. In other words, salaries of employees whose work is solely in connection with a specific company, expense group or line of business shall be allocated thereto.
When a direct allocation is not made, salaries, with certain exceptions hereinafter noted, shall be allocated on whichever of the following bases, or combinations thereof, are appropriate: Number of Items or Units, Time Studies, Overhead on Other Allocations, Premiums, Dollar Volume of Losses, and Other Special Studies.
All bases of allocation, and the application thereof, shall be subject to restrictions, modifications and exceptions in the General Instructions Regarding Allocation Bases which follow.
Item and unit counts may include Number of Premium Entries, Number of Policies, Number of Loss Entries, Number of Accidents, Number of Employees, and any other unit or item counts which aid in the allocation of expenses. To the greatest practical extent, such unit or item counts shall be applied only to expenses incurred in activities having a direct relationship to the bases.
In determining the applicability of Number of Premium Entries as a basis of allocation, consideration shall be given to the number of premiums on original policies plus additional premiums, return premiums, reinsurance premiums, and return premiums on reinsurance. Where more than one card is punched or more than one entry is made covering only one amount, consideration shall be given procedural differences in connection with types of entries.
In determining the applicability of Number of Policies as a basis of allocation, consideration shall be given to policies underlying another policy, to policies covering more than one line of business, to policies for various terms, and to the effect on cost of procedural differences in connection with types of policies.
In determining the applicability of Number of Loss Entries as a basis of allocation, consideration shall be given to the number of gross entries plus salvage entries and reinsurance entries, for paid or outstanding losses, or both, and to the effect on cost of procedural differences in connection with types of loss entries.
In determining the applicability of Number of Accidents as a basis of allocation, consideration shall be given to accidents on which specific estimates are set up, those on which no specific estimate is made, and those for which no claim is made, and to the effect on cost of procedural differences in connection with types of accidents.
The basis Number of Employees is of limited application and shall be used only where the cost logically follows the number of employees. It may be of use, where properly weighted, in allocating such units as cafeteria, personnel department, and payroll department.
Time studies are actual measurements of time required to make motions, to complete a routine of regularly occurring procedure. In contemplating the use of a time study as a basis of allocation, consideration shall be given to the number of motions which must be studied to obtain a valid average and to possible distortions in the average caused by exceptional conditions during the study.
Salaries of supervisors and executives may be distributed as an overhead on the salaries of employees whom they supervise. Salaries of departments such as mail and general stenographic may be distributed as an overhead on the salaries of people whose work is handled. However, no salaries shall be distributed as an overhead on other allocations if any other basis is more appropriate.
Premiums shall not be used as a basis of allocation except when specifically noted as a permissible basis or when the expense is incurred as a percentage of premiums (subject to instructions under Commission and Allowances in s. Ins 6.30(3) (a) 2. c.), or when the expenses are logically allocable on the basis of premiums. In no event shall premiums be used as a basis of allocation in connection with clerical, technical, secretarial, office maintenance, supervisory and executive activities unless such basis is clearly appropriate and until all other reasonable bases of allocation have been considered and found less appropriate than premiums.
In determining the applicability of premiums as a basis of allocation, consideration shall be given to the applicability of direct and reinsurance premiums, and written, earned and unearned premiums, as well as to subdivisions thereof.
Dollar Volume of Losses shall be used as a basis of allocation only when the activities resulting in expense are influenced by the dollar amounts of losses, and only when all other reasonable bases of allocation have been considered and found less appropriate than Dollar Volume of Losses.
In determining the applicability of Dollar Volume of Losses as a basis of allocation, consideration shall be given to the applicability of direct and reinsurance losses, and paid, incurred and outstanding losses as well as to subdivisions thereof.
Salaries may be allocated on the basis of other special studies, provided demonstrably more accurate results are thereby produced than through the use of the bases heretofore discussed, but not otherwise.
Weightings may be applied in using any bases of allocation but the justification for such weightings shall be stated in the Detail of Allocation Bases (see s. Ins 6.30(5) (a) 3. c.). Weightings shall not be used as a means for giving effect to a basis which is prohibited by these instructions.
The bases of allocation used shall be appropriate and applicable to the expenses to which such bases are applied. All bases shall be limited and subdivided in such manner that the expenses to which the bases are applied have a reasonable relationship to each component of the bases. For example, an allocation basis which includes a particular line of business shall not be applied to expenses incurred for activities which do not include that line.
Any basis of allocation which is found to be inappropriate shall be discontinued.
Where an individual or a group of employees work on totals, the allocation of the expenses involved may be based on the information entering into the totals.
All bases of allocation shall be compiled or calculated from the transactions or procedures for the period applicable to the expenses to be allocated, unless the use of any other period is justified by investigation made during the applicable period. Such justification shall be set forth on the Detail of Allocation Bases (see s. Ins 6.30(5) (a) 3. c.).
The following types of records shall be prepared by each company or fleet in allocating salaries to companies, expense groups and lines of business: Allocation of Salaries, Recapitulation of Salaries, and Detail of Allocation Bases.
The Allocation of Salaries and the Recapitulation of Salaries shall be prepared either for the twelve months of the current calendar year, or for twelve months ending not earlier than September 30th of the current year, in which case the ratios established shall be applied to the total salaries for the twelve months of the current calendar year. The second method herein referred to shall not be followed if operations during the period used were materially different from operations during the period to which the ratios are to be applied. All amounts included in the operating expense classification Salaries, for the period used in preparing the Allocation of Salaries and the Recapitulation of Salaries shall be accounted for on such records.
Forms of the records are shown as Forms A through C at the close of s. Ins 6.30(5). The forms may be of any convenient size, and may be entered in ink, type, or by other mechanical means, provided the entries are legible. If the organization or method of operation of any company is such as to make desirable changes in the forms such as a rearrangement of the columns, or a separation of the forms into two or more parts, such changes may be made, provided the substituted forms do not, in any respect, show less information than called for on the forms shown herein, and do not result in confusing the presentation of salary allocation.
Such records shall be maintained in good order and shall at all times be readily available for examination.
First: The form, Allocation of Salaries, is shown as Form A. To aid in the understanding of the form, specimen entries have been made thereon and, as further aids to understanding, each column is explained in the following paragraphs:
Column 1: List each similarly employed unit within each departmental or other division in the organization. By "similarly employed" is meant employed in essentially the same or similar activities in or for the same department or other division.
The personnel shall be divided into as many units as necessary to show each type of work done by each departmental or other division in the organization. Employees whose duties are not solely related to the work performed by one unit, such as some in supervisory positions, shall be listed separately by title or job classification.
Column 2: Gross salaries applicable to each unit shown in Column 1.
Columns 3, 4 and 5: These columns are for use when the Salaries classification is affected by allocations made to other companies.
A separate line is to be used for the allocation to each company or group of companies. When intercompany allocations are not made, or when quota share percentages can be applied to fleet totals, Columns 3, 4 and 5 need not be used.
Designating numbers shall be entered in Column 4 for the methods used in intercompany allocations.
Column 6: Designating numbers shall be entered in this column for the methods used in allocating salaries to expense groups.
Columns 7 to 10: The amounts assigned to each expense group shall be in accordance with the method shown in Column 6. At the side of each expense group column (except the column Investment Expenses) is shown a narrower column captioned "Line Dist.", wherein shall be entered designating numbers for the methods to be followed in distributing salaries to lines of business.
Second: Pool and Quota Share Reinsurance. When quota share reinsurance is in effect and when salaries may be allocated in strict accordance with the quota share percentages, the amounts shown in the Allocation of Salaries Form may be those subject to quota share. Quota share percentages may, in such cases, be applied to the totals either on the Allocation of Salaries or the Recapitulation of Salaries.
Third: Branch and Field. Branch office salaries shall be shown separately in the Allocation of Salaries and in the Recapitulation of Salaries. In combining branch employees into similarly employed units, it shall be permissible to consider as a unit all similarly employed personnel in all branch offices having similar functions, and handling approximately the same relative volume of each line of business.
Fourth: Salary Reimbursements to Other Companies. Due to expense sharing with another company, outside of the company or fleet, debits may appear in the salary accounts for reimbursements to outside companies. Such payments are to payments amount to less than 10% of gross salaries paid by the company to its own employees, the amounts shown on the Allocation of Salaries may be distributed as an overhead on all other salary distributions. If more than 10%, the distribution shall be obtained from the other company.
Fifth: Salaries Not Specifically Reimbursable. When the employees of a company devote time to the affairs of another company, and the reimbursements therefor are handled in accordance with the instructions, Expenses for Account of Another or Income from Special Services (see s. Ins 6.30(1) (b) 22. b. and c.) the salaries for each similarly employed unit applicable to work done for such other company shall be shown separately on the Allocation of Salaries (in Columns 3 to 10 incl.).
When all distributions called for on the Allocation of Salaries Form have been completed, the Recapitulation of Salaries shall be made.
For each company to which salaries have been allocated on the Allocation of Salaries Form, the amounts shown in each expense group column shall be combined by the line distribution codes shown in the "Line Dist." columns. The totals thus obtained shall be entered on the Recapitulation of Salaries Form and allocated to lines of business in accordance with the line distribution codes.
The form, Recapitulation of Salaries, is shown in three parts, B-1, B-2, and B-3. B-1 is for Loss Adjustment Expenses, B-2 is for Acquisition, Field Supervision and Collection Expenses, and B-3 is for General Expenses. For purposes of illustration, the specimen entries, applicable to Company A, made on the Allocation of Salaries Form have been continued on the Recapitulation of Salaries Form. Note that, for Company A, the figures in the expense group columns on the Allocation of Salaries Form have been combined by "Line Dist." codes, entered on the Recapitulation of Salaries Form, and then spread to lines of business based on the "Line Dist." codes.
The bases of allocation used on the Allocation of Salaries Form shall be fully described on the Detail of Allocation Bases Form. There shall be a separate sheet for each basis and the sheets shall be kept in consecutive numerical order, available at all times for examination.
When the basis of allocation cannot be fully described on the form, subsidiary worksheets, compilations and data shall be either attached to the form or filed separately and readily available.
The Detail of Allocation Bases Form and all subsidiary worksheets, compilations and data shall be clear and legible; shall show the sources, detail and dates of all figures used; shall disclose the names of persons or groups responsible for all compilations, data, calculations, studies, estimates, judgment factors, weightings, etc., and the dates thereof; and, in general shall include complete explanations of all figures used and decisions made.
Note: The Detail of Allocation Bases Form need not be prepared each year, but with appropriate changes in supporting worksheets, etc., may remain current as long as the bases are in effect.
The Detail of Allocation Bases Form is identified as Form C and four illustrations of the form are shown. The allocation bases No. 1, 101, 105 and 501 shown on the Allocation of Salaries Form have been carried into the forms and specimen explanations given.
Ins 6.30
FORM A
ALLOCATION OF SALARIES
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) |
Title of Similarly Employed Units | Gross Salaries | Allocation of Gross Salaries in Column 2 to Companies Including the Employing Company | Method of Allocation to Expense Groups | ||||||
General Accounting Dept. | |||||||||
A | $2,000 | $2,000 | |||||||
Investment Records | $3,000 | #1 | #101 | ||||||
B | 1,000 | 1,000 | |||||||
A | 4,500 | $4,500 | |||||||
Premium Tax Returns | 6,000 | #2 | #103 | #503 | |||||
B | 1,500 | $1,500 | |||||||
A | 10,000 | 1,000 | $4,000 | $1,000 | 4,000 | ||||
Internal Auditing | 15,000 | #3 | #105 | #501 | #502 | #502 | |||
B | 5,000 | 500 | 2,150 | 200 | 2,150 | ||||
A | 21,500 | 1,075 | 6,450 | 1,075 | 12,900 | ||||
General Bookkeeping | 30,000 | #4 | #107 | #501 | #502 | #502 | |||
B | 8,500 | 425 | 2,550 | 425 | 5,100 | ||||
A | 10,500 | 1,155 | 2,940 | 525 | 5,880 | ||||
Manager and Assistant | 15,000 | #5 | #109 | #501 | #502 | #502 | |||
B | 4,500 | 540 | 1,305 | 180 | 2,475 | ||||
Note: Totals in Col. 5 for each similarly employed unit must equal amount in Col. 2.
Ins 6.30
FORM B
RECAPITULATION OF SALARIES
Company A B-1 LOSS ADJUSTMENT EXPENSES | |||||||||||||||||
Allocation Bases (From "Line Dist." columns on Allocation of Salaries) | Total | Automobile Bodily Injury and Property Damage | Auto-mobile Physical Damage and Theft | Worker's Compensation | Liability and Collision ex. Auto | Glass | Burglary and Theft | Fire and Allied Lines | Home-owners Multiple Peril | Commercial Multiple Peril | Inland Marine | Ocean Marine | Fidelity | Surety | Boiler and Machinery | Accident and Health | Other |
#501 | $13,390 | $4,820 | $6,026 | $1,741 | $268 | $134 | $134 | $267 | |||||||||
Company A B-2 ACQUISITION, FIELD SUPERVISION AND COLLECTION EXPENSES | |||||||||||||||||
Allocation Bases (From "Line Dist." columns on Allocation of Salaries) | Total | Automobile Bodily Injury and Property Damage | Auto-mobile Physical Damage and Theft | Worker's Compensation | Liability and Collision ex. Auto | Glass | Burglary and Theft | Fire and Allied Lines | Home-owners Multiple Peril | Commercial Multiple Peril | Inland Marine | Ocean Marine | Fidelity | Surety | Boiler and Machinery | Accident and Health | Other |
#502 | $2,600 | $910 | $1,248 | $286 | $52 | $26 | $31 | $47 | |||||||||
Company A B-3 GENERAL EXPENSES | |||||||||||||||||
Allocation Bases (From "Line Dist." columns on Allocation of Salaries) | Total | Automobile Bodily Injury and Property Damage | Auto-mobile Physical Damage and Theft | Worker's Compensation | Liability and Collision ex. Auto | Glass | Burglary and Theft | Fire and Allied Lines | Home-owners Multiple Peril | Commercial Multiple Peril | Inland Marine | Ocean Marine | Fidelity | Surety | Boiler and Machinery | Accident and Health | Other |
#502 | $22,780 | $7,973 | $10,934 | $2,506 | $456 | $228 | $273 | $410 | |||||||||
#503 | 4,500 | 904 | 3,011 | 308 | 110 | 47 | 60 | 60 | |||||||||
Ins 6.30
FORM C - ILLUSTRATION 1--DETAIL OF ALLOCATION BASES
Company Purpose Number | ALPHA GROUP INTERCOMPANY ALLOCATION 1 | Basis VALUE OF INVESTMENTS | ||||
EXPLANATION OF BASIS | ||||||
Based on statement values of bonds and stocks owned (See memo of Allocation Committee 11/14/58) | ||||||
APPLICATION OF BASIS | ||||||
Company | 1958 | 1959 | 1960 | 1961 | 1962 | |
A ...... | ........................................... | 662/3% | ||||
B ...... | ........................................... | 331/3% | ||||
Ins 6.30
FORM C - ILLUSTRATION 2--DETAIL OF ALLOCATION BASES
Company Purpose Number | ALPHA GROUP ALLOCATION TO EXPENSE GROUPS 101 | Basis DIRECT | ||||
EXPLANATION OF BASIS | ||||||
Direct to Investment Expenses. This basis is applicable to the positions and units listed on the memo dated 11/14/58 from the Allocation Committee. | ||||||
APPLICATION OF BASIS | ||||||
Expense Groups | 1958 | 1959 | 1960 | 1961 | 1962 | |
Company A | ||||||
Investment Expenses | 100% | |||||
Loss Adjustment Expense ............................ | ||||||
Acquisition, Field Supervision and Collection Expenses | ||||||
General Expenses | ||||||
Company B | ||||||
Investment Expenses ................................ | 100% | |||||
Loss Adjustment Expenses | ||||||
Acquisition, Field Supervision and Collection Expenses | ||||||
General Expenses | ||||||
FORM C - ILLUSTRATION 3--DETAIL OF ALLOCATION BASES
Company Purpose Number | ALPHA GROUP ALLOCATION TO EXPENSE GROUP 105 | Basis TIME ESTIMATE | ||||
EXPLANATION OF BASIS | ||||||
This basis was made after a general analysis of the duties of the Internal Auditing unit of the General Accounting Department (See memo of Allocation Committee 11/15/58) | ||||||
APPLICATION OF BASIS | ||||||
1958 | 1959 | 1960 | 1961 | 1962 | ||
Company A | ||||||
Investment Expenses ................................ | 10% | |||||
Loss Adjustment Expenses -- | 40% | |||||
Acquisition, Field Supervision and Collection Expenses . . . . | 10% | |||||
General Expenses ................................... | 4% | |||||
Company B | ||||||
Investment Expenses ------ | 10% | |||||
Loss Adjustment Expenses -- | 43% | |||||
Acquisition, Field Supervision and Collection Expenses . . . . | 4% | |||||
General Expenses ................................... | 43% | |||||
Ins 6.30
FORM C - ILLUSTRATION 4--DETAIL OF ALLOCATION BASES
Company Purpose Number | ALPHA GROUP ALLOCATION TO LINES OF BUSINESS 501 | Basis NO. OF LOSS ENTRIES | |||
EXPLANATION OF BASIS | |||||
The Allocation Committee, in consultation with Mr. Jones, General Adjuster, decided to allocate auditing and bookkeeping work, done in connection with losses, on the basis of number of loss entries, modified by certain weightings and discounts. Memo from the Allocation Committee dated 7/18/58, together with work sheet, tabulations, etc., are attached hereto. | |||||
APPLICATION OF BASIS | |||||
1958 | 1959 | 1960 | 1961 | 1962 | |
Company A | |||||
Auto BI and PD -------- | 36% | ||||
| -------- | |||||
Auto Physical Damage and Theft - | -------- | ||||
Worker's Compensation --- | 45% | ||||
Liability and Collision ex. Auto ---- | 13% | ||||
Glass ---- | 2% | ||||
-------- | |||||
-------- | |||||
Burglary and Theft -------- | 1% | ||||
-------- | -------- | ||||
Fire and Allied Lines -------- | -------- | ||||
-------- | -------- | ||||
Homeowners Multiple Peril - | -------- | ||||
-------- | -------- | ||||
Commercial Multiple Peril -- | -------- | ||||
-------- | |||||
Inland Marine | |||||
-------- | |||||
-------- | |||||
Ocean Marine | -------- | ||||
-------- | |||||
-------- | |||||
Fidelity -------- | 1% | ||||
-------- | -------- | ||||
-------- | -------- | ||||
Boiler and Machinery -------- | -------- | ||||
-------- | -------- | ||||
Accident and Health -------- | -------- | ||||
-------- | -------- | ||||
Other -------- | -------- | ||||
-------- | -------- | ||||
-------- | -------- | ||||
Total -------- | 100% | ||||
-------- | |||||
-------- | |||||
Company B | |||||
Auto BI and PD -------- | -------- | ||||
-------- | -------- | ||||
Auto Physical Damage and Theft | -------- | ||||
-------- | -------- | ||||
Worker's Compensation -------- | -------- | ||||
-------- | -------- | ||||
Liability and Collision ex. Auto -------- | -------- | ||||
-------- | |||||
Glass -------- | 11% | ||||
-------- | |||||
-------- | |||||
Burglary and Theft ------- | 7% | ||||
------------ | |||||
Fire and Allied Lines ------ | ------------ | ||||
------------ | ------------ | ||||
Homeowners Multiple Peril ----------- | ------------ | ||||
------------ | ------------ | ||||
Commercial Multiple Peril ----------- | ------------ | ||||
------------ | ------------ | ||||
Inland Marine | ------------ | ||||
------------ | ------------ | ||||
------------ | |||||
Ocean Marine | ------------ | ||||
------------ | ------------ | ||||
------------ | |||||
Fidelity | 23% | ||||
------------ | |||||
------------ | |||||
Surety | 59% | ||||
------------ | |||||
------------ | |||||
Boiler and Machinery | ------------ | ||||
Accident and Health | ------------ | ||||
------------ | ------------ | ||||
Other | ------------ | ||||
------------ | ------------ | ||||
------------ | |||||
Total | 100% | ||||
------------ ------------ | |||||
Wis. Admin. Code Office of the Commissioner of Insurance Ins 6.30