Expenses that are identified by the state and coverage code of the related claim to properly match the costs to the policy and earned premium are called:

Question

Options

• ALoss adjustment expense
• BDefense and Cost Containment
• CAdjusting and Other
• DSurveillance expense

• A
  8% (2)
• B
  73% (19)
• C
  4% (1)
• D
  15% (4)

Explanation

Defense and Cost Containment (DCC) expenses are the subset of loss adjustment expenses specifically allocated to individual claims and coded by state and coverage type - this granular tracking is what allows actuaries and accountants to properly match defense costs (attorney fees, expert witnesses, litigation support) back to the policy and earned premium that generated the claim.

A is wrong because "Loss Adjustment Expense" is the umbrella category encompassing all claim-settlement costs, not a specific subcategory with claim-level coding.

C is wrong because Adjusting and Other (A&O) covers general claim-adjusting and administrative costs (field adjusters, claim offices), which are more broadly allocated rather than individually tagged to a specific claim's state and coverage code.

D is wrong because surveillance expense is a specific investigative cost that falls within DCC - it is not the overarching category being described.

Memory tip: Think "Defense = Directly coded" - DCC expenses require direct claim-level identification (state + coverage code) because you can't defend a lawsuit without knowing exactly which claim, which state's laws apply, and which coverage is at issue.

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