Which item is an example of an underwriting expense?

Which item is an example of an underwriting expense?

• A. Salaries of underwriters
• B. Advertising expenses
• C. Claims payments
• D. Rent

Answer: (A)

Underwriting expenses are the costs incurred to evaluate, accept, and price risks and issue policies. Salaries of underwriters directly reflect the labor involved in analyzing applications, assessing risk, and determining premiums, so they fit squarely in this category. Advertising expenses are marketing costs aimed at attracting new business, not underwriting. Claims payments are losses paid to insureds, not underwriting costs. Rent is a general operating expense and not a direct underwriting activity in this context. So the salaries of underwriters best illustrate an underwriting expense.

Underwriting expenses are the costs incurred to evaluate, accept, and price risks and issue policies. Salaries of underwriters directly reflect the labor involved in analyzing applications, assessing risk, and determining premiums, so they fit squarely in this category. Advertising expenses are marketing costs aimed at attracting new business, not underwriting. Claims payments are losses paid to insureds, not underwriting costs. Rent is a general operating expense and not a direct underwriting activity in this context. So the salaries of underwriters best illustrate an underwriting expense.