Categorizing Expenses

gsawhney

Hi Graham and Everyone,

Another cheeky question from our friends at SoA:

Indicate whether each of the following LAE items is categorized as DCC or A&O under SSAP No. 55:
(i) Surveillance expenses
(ii) Attorney fees incurred in the determination of coverage, including litigation between the reporting entity and the policyholder
(iii) The cost of engaging experts
(iv) Loss adjustment expenses for participation in voluntary and involuntary market pools if reported by accident year

I read somewhere that DCC expenses are those which vary with the amount of loss and A&O are those which either remain constant or vary with # of claims.

Any other rule of thumb for categorizing these expenses?

Solution :
1. DCC
2. A&O
3. DCC
4. DCC

Thanks

graham

Cheeky is being kind! It was straight memorization!

The SSAP-55 reading doesn't provide much of a formal definition of DCC and A&O beyond what the acronyms mean:

• DCC is Defense and Cost Containment
• ACC is Adjusting and Other

The reading then provides a list of examples for each, which you had to memorize to know the answer to that exam question. I don't think there's any rule of thumb. Unless I knew for certain how to categorize a particular item, I would just answer DCC for all them (or A&O for all of them) because you'd statistically get half the points (assuming they didn't deduct points for wrong answers.) I've linked to this post from the wiki.

For DCC: includes but is not limited to..

For A&O: includes but is not limited to..

gsawhney

Cool, one possible trick is all attorney related fee go to A&O...which is counterintuitive.
Thanks

graham

I tried to think of a way to categorize them without specifically memorizing them, but once you've spent the time required to figure out a rule of thumb, you probably would have memorized them anyway.

I think if you want to know these items, the best way is to invent a mnemonic, or a dumb story that ties them together, or a song. Those are some the standard ways to memorize a list.