Income is usually measured by premium earned while outgo is the sum of losses and loss adjustment expenses incurred, commissions incurred, and an expense fee.

Question

Options

• ATrue
• BFalse

• A
  83% (19)
• B
  17% (4)

Explanation

Option A is correct because this statement accurately describes how income and outgo are defined in insurance/actuarial accounting: income is measured by premiums earned (the portion of written premiums attributable to the coverage period), while outgo encompasses losses incurred, loss adjustment expenses (LAE) incurred, commissions incurred, and an expense fee. This is the standard framework used in insurance financial analysis to assess profitability and underwriting performance.

There are no distractors to refute here since the only alternative (B, False) is simply incorrect - the statement as given is a precise and standard definition used in actuarial and insurance accounting contexts.

Memory tip: Think of the insurance equation like a business P&L - "what comes in" (premiums earned = income) versus "what goes out" (losses + LAE + commissions + expense fee = outgo). The word LACE can help you recall the outgo components: Losses, Adjustment expenses, Commissions, and Expense fee.

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