Office premium

Category: Actuarial fundamentals · Reviewed by Mark Fox, Broker · Renewals · Last reviewed

Office premium

The office premium is the premium an insurer charges the policyholder, comprising the risk premium plus all loadings for expenses, commission, reinsurance cost, contingency and profit. It is the headline figure on a quotation before statutory taxes and levies.

Build-up

Office premium = Risk premium + Expense loading + Commission + Reinsurance cost loading + Cost of capital + Profit loading

Expense loading components

• Acquisition costs — commission, MGA fees, marketing.
• Underwriting expenses — staff, technology, surveyors.
• Claims handling expenses — internal staff and external loss adjusters.
• Investment management — fees and operating costs.
• Overhead — premises, IT, regulatory cost recovery.

“Office” terminology

The term originates in 19th-century life assurance (“the Office”, meaning the insurance company), and persists as a UK actuarial convention. The American equivalent is gross premium, though in UK general insurance “gross premium” usually means after IPT/levies.

References

• IFoA. Practical Guide to GI Pricing.

Cross-references

• Pure premium
• Risk premium
• Acquisition cost ratio

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