Acquisition cost ratio

Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22

~2 min read

Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22

Category: Underwriting practice · Reviewed by Taylor Watts, Broker · New Business · Last reviewed

In short: The acquisition cost ratio is the proportion of earned (or written) premium spent on acquiring business — primarily commission to brokers and MGAs, plus marketing and policy issuance expense.

Formula

Acquisition cost ratio = Acquisition costs / Premium (earned or written)

Components

Broker commission — the dominant cost in commercial lines.
MGA / coverholder fees — for delegated authority business.
Direct marketing spend — for direct-to-consumer carriers.
Aggregator / price comparison fees — for personal lines via PCWs.
Sales channel cost — direct sales force in business-to-business.
Policy origination cost — issuance, documentation, underwriting variable cost.

Typical levels

Channel	Acquisition cost ratio
Commercial lines broker channel	15–25%
Personal lines PCW	15–25%
Direct-to-consumer with marketing	20–35%
Affinity / partnership	10–25%
Lloyd’s open market	20–35%
Delegated authority schemes	25–40%

Strategic significance

The acquisition cost ratio is the principal lever distinguishing direct and broker models. Direct insurers spend more on marketing but save commission; broker channels spend less on marketing but pay distribution. Total acquisition cost ratios are often broadly similar.

References

ABI statistics.
Lloyd’s annual report.

Cross-references

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