june 2008 mac

charliemansfield

Hi

Task 2.3

How do you calculate the loss adjuster cost (fee) varience when you have a range of figures?

The answer is £10000 adverse, but i have no idea how to arrive at this figure.

Does anyone have any suggestions?

Thanks

Charlie

sdv

Loss adjuster costs

budgeted costs are £250,000 for 2500 claims. (£100 per claim)

actual costs are £210,000 for 2000 claims

if you flex the budget at 2000 claims then the budgeted costs will be 2000 x £100 = £200,000

actual costs - budgted costs = varience

210,000 - 200,000 = £10,000 Adverse

SandyHood

I've added an explanation of the variance from my answer at the time.
This is unusual as far as the MAC variance questions go as it looks at the total cost variance, as there is not enough information to produce sub-variances for efficiency or rate.


Loss adjuster cost (fee) variance
The standard loss adjuster cost per claim is £100. This does not recognise
the different cost based on the size of the claim. In May the mix of claims
included more than half that were for over £5,000. As the largest claims take
the longest time for the loss adjuster, this may explain some or all of the
£10,000 adverse variance.