Section 500.1507. Expense allocation.

(1) Expense provisions for each category of expenses shall be reasonably allocated among classifications in a manner that equitably reflects variations, if any, in the manner in which such expenses are anticipated to be incurred with respect to the groups of individuals or risks defined by those classifications. Expenses, other than allocated loss adjustment   expenses,  shall   not  be  presumed  to   be  incurred proportionally to classification relativities based on  anticipated  loss.

(2)   Expense provisions for premium taxes, if  any,  shall   reflect  the applicable premium tax rate.

(3)    Expense provisions for each other category of  expenses  shall   be reasonably allocated among classifications based on losses, coverages, exposures, or other basis that equitably measures the variations, if any, in the manner in which such expenses are   anticipated to be incurred with respect to the classifications. Expense allocation methods may include percentage-of-premium, uniform-per-coverage, uniform-per-exposure, or other basis, as appropriate and justified.

History: 1981 AACS.