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adjustment expenses, we must also estimate the liability
for unallocated loss adjustment expenses.

Most ULAE is the expense of operating a claims
department, and includes such items as claim adjuster
fees, office rent, and utilities. Unallocated loss adjustment
expense are generally not recorded in the same level of
detail as allocated loss adjustment expenses. Usually
some type of internal allocation procedure is used to
distribute calendar year ULAE expenses to line of
business.

This internal allocation procedure should reflect the claim
activity that gave rise to the expense such as the number
of claims incurred during the year, claims closed during
the year, number of claims remaining open during the
year, number of days claims are open, or number of
payment or reserve transactions during the year.

Ideally, standard costs are assigned to each transaction
and total claim department costs are allocated in
accordance to the distribution of standard costs.

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