2018 Spring #10
The question asks why actuary might be involved in the allocation of expenses and the answers explain that if expenses are misallocated then this might distort profitability etc.
How does this explain why the involvement of actuaries is necessary? Couldn't accountants make the same expenses allocation calculation?
Comments
From a technical standpoint, accountants can very well allocate expenses to lines, given the method of allocation. But the allocation of expense to different lines is, in certain cases, an abstraction that is necessary for the specific purpose of evaluating profitability by line. Since actuaries are responsible for pricing the insurance product, profitability falls in their purview, and by association, so does the allocation of expenses.
for part c, can I answer
Develop LAE for different book of business and anlysis loss triangles
Calculate UW expenses?
No, these are not aligned with where they were going with this question.