In relation to insurance, it constitutes the direct costs an insurer incurs to “acquire” the premium— such as fees and commissions paid to a broker or fronting firm as well as any indirectly attributable costs (cash flows). For example, direct acquisition costs include contract set-up costs, commissions, underwriting costs, certain stamp duties and other costs of contract issue attributable to a specific contract (policy), and also include such costs incurred for a portfolio of contracts. However, acquisition costs do not include any allocation of overhead expenses.
More specifically, acquisition costs represent the total costs of writing/ issuing an insurance policy, including selling expenses (marketing/ advertising costs), commissions, risk classification, policy preparation, recording data, etc.
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