Originally Posted by Buck
ULAE or AAO reserve is for the claims department overhead expenses (claims department staff salaries, claims department investigations ...). It is part of claims adjustment expense reserve.
Then, you think it is necessary only limited to those two scenarios in the original post? What about an example of third scenario: company expansion? If a company is expanding to several new states, the premium earned volume will increase, and subsequently incoming claims and claims department staffing and spendings will increase. Normally, in this type of scenarios, the company's claims department will not immediately increase its budget spending to the level necessary, wouldn't it be necessary to increase ULAE or AAO reserve?
If you agree an expanding company needs increasing ULAE or AAO reserve, then any company at any time would need accurate ULAE or AAO reserve.
the claims department should be able to take on some extra workload before their expenses increase. more staff will be added at some point and then the new staffing level will be able to handle further growth to some point. the expense moves step-wize while the premium growth is more of a curve
"If the stated goal of a program is never met, but the program continues, then you can trust that the unstated goal of the program is being met." - FormLetter
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Obama is dumber.
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