Washington Life Producer Practice Exam

What is considered an expense factor in an insurance program?

1. Claims payments

2. Mortality costs

3. Investment income

4. Administrative expenses

The correct answer is: Mortality costs

An expense factor in an insurance program refers to the various costs incurred in the operation and management of the insurance policy. Administrative expenses are a critical component of these expense factors. They encompass costs associated with underwriting, processing claims, maintaining records, and customer service. In the context of the other potential answers, claims payments refer specifically to the costs incurred when the insurer pays out claims to policyholders. Mortality costs are related to the expected payouts due to policyholder deaths but do not cover the operational costs of running the insurance program. Investment income is revenue generated from the insurer's investment portfolio and is not an expense; rather, it helps offset expenses and contribute to profitability. Thus, administrative expenses accurately represent the ongoing operational costs that insurers factor into their pricing and overall financial management, making this the correct choice.