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Acquisition cost

1. Total cost to the company of setting up a new business such as commissions to agents and brokers, supervision costs, sales promotion expenses, and cost of secretarial work. 2. In health insurance, the cost of selling, underwriting, and issuing a new insurance policy (administrative costs, brokers’ commissions, advertising, and medical fees). Also called policy acquisition costs.

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UK: cost associated with the underwriting of new business, including commission paid to brokers and agents (and to the cedant company in the case of reinsurance)

 

Acquisition Costs

All expenses directly related to acquiring insurance or reinsurance accounts; i.e., commissions paid to agents, brokerage fees paid to brokers, premium taxes and expenses associated with marketing, underwriting, contract issuance and premium collection.****Insurer’s/Reinsurer’s cost of securing business including commission to Agents and brokers and other marketing expenses. It also can be accounting charge for placing a new Policy as on Insurer’s books.

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The expense undertaken to acquire new business. The concept applies to both agents and companies. The largest portion of an insurer’s acquisition cost is agent’s or sales representative’s commission or bonus.

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Expenses incurred by an insurer in obtaining new business and issuing policies. Commission to intermediaries accounts for the largest portion of acquisition costs.