Investigation and management costs incurred to settle claims, distinct from the indemnity payment itself.
Loss adjustment expenses (LAE) cover all claim-handling costs other than the indemnity payment: loss adjuster fees, legal costs, investigation services, internal handler costs. The LAE ratio (LAE / incurred losses) measures claims process efficiency. LAE breaks into ALAE (costs attributable to a specific claim) and ULAE (claims department overhead not individually attributable). A high LAE ratio signals litigious claims or complex technical assessments.
12% LAE ratio on a motor book: 12 cents of expenses per euro of loss, mainly vehicle assessment fees.
loss adjustment expenses, LAE, frais de liquidation, claims handling costs