What term describes the costs an insurer expects to incur while processing a claim?

The term that describes the costs an insurer expects to incur while processing a claim is loss adjustment expenses. These expenses encompass various costs associated with investigating, adjusting, and settling claims. This includes fees for adjusters, legal expenses, and costs related to obtaining expert opinions or assessments. Essentially, loss adjustment expenses are incurred by the insurer on claims that have been reported and are being processed, serving an essential role in the overall claims management process.

Administrative expenses generally refer to broader costs involved in running the insurance business, such as salaries, office expenses, and general overhead, but do not specifically relate to the costs incurred for processing claims. Claim reserves represent the estimated amount that an insurer sets aside to pay for future claims, which reflects the anticipated financial liability but does not directly account for the processing costs. Premium surplus refers to the amount that exceeds the required reserves, indicating financial health or profitability, rather than directly related to claim processing expenses.