Unbundling Expenses

Summary of Unbundling Expenses

The act of breaking out the component costs of a contract of insurance. In addition to pure protection against risk, an insurer must provide for costs of administration, claims processing, actuarial work, et cetera. These and other cost elements are indistinguishable in the policy rate. By unbundling, each factor is attributed its own cost. As a result, the insurer and insured may agree that some functions, such as claims handling, may be undertaken by the insured, resulting in an appropriate reduction of insurance costs.

(Main Author: William J. Miller)