The sampled roles differ in geography, seniority, authority, employment structure and work content. Calculate the alternative operating models from their actual task scope rather than averaging the advertised ranges.
How should an insurer calculate internal production cost?
Use an activity-based model:
Attributable internal production cost = production labour + production supervision + relevant software and equipment + training and recruitment allocation + production-related QA and correction.
Then compare on the same acceptance boundary:
Total cost per accepted file = all attributable costs for a defined file cohort ÷ files in that cohort that pass the agreed carrier standard.
This is the desk’s recommended decision model, not an industry-published benchmark.
| Cost input | Recommended treatment | Common comparison error to avoid |
|---|---|---|
| Salary | Use actual pay or a clearly labelled recruitment scenario | Treating the midpoint of a wide advertised band as an expected hire |
| Benefits, employer costs and incentives | Obtain Finance’s actual loading assumptions | Assuming advertised base pay equals fully loaded cost |
| Available production hours | Deduct leave, training, meetings and other assigned work using internal records | Dividing salary by nominal working hours and assuming all are productive |
| Reviewer and correction effort | Record separately from first-draft preparation | Charging review to the internal option but omitting it from outsourcing |
| Inspection and settlement activities | Keep outside the production comparison unless both options include them | Counting an entire adjuster role as avoidable |
| Implementation | Allocate configuration, integration, testing and transition consistently | Comparing steady-state internal costs with a supplier’s introductory fee |
| Unfinished files | Keep cohort costs and unresolved work visible | Dividing current costs by an unrelated set of completed claims |
How should a catastrophe day rate be normalised?
Use the quoted rate only with confirmed working-day, output, review and revision assumptions. AdStrat’s $525-per-day example is explicitly event-dependent; it should not be annualised into a salary or divided by an invented files-per-day figure. Advertisement. (linkedin.com)
For a Production Quote Normaliser, request:
- Paid availability versus payment only when assigned.
- Minimum days, cancellation provisions and permitted working hours.
- Complexity definitions and evidence-completeness requirements.
- Revision ownership and whether reviewer time is included.
- Software, supervision and escalation charges.
- Accepted-file output, not merely estimates submitted.
Keep released capacity separate from cash savings in the decision model. Ask Finance to specify whether a proposed improvement avoids a funded hire, reduces overtime or supplier invoices, or simply allows existing employees to undertake other work.
Sources cited on this page
- Advertisementlinkedin.com