Cost (Premium and Claims) Allocation Studies
Pinnacle can assist you in developing a method for allocating premium expense and/or self-funded claim costs to the responsible subsidiaries, divisions and/or departments. Such allocation methodologies are based upon both risk exposure and actual loss experience. If you have such a system for allocating these expenses, Pinnacle can evaluate your current system along with the financial and motivational requirements in place and present any recommendations that would allow for refinement.
In the interest of cost accounting, if you wish to allocate as much identifiable cost as possible throughout your organization, developing a methodology that is fair, reasonable and equitable is prudent management. It allows for a more accurate determination of the profitability of a business unit and holds management accountable for risk management expenses.
In our experience, when costs are allocated to the subsidiary, division or departmental level, not only is there a more accurate determination of profit and loss, but there is also a renewed interest in controlling expense and loss control, which benefits the corporation at-large.