Allocated Loss Adjustment Expense
Expenses directly attributable to a specific claim, such as attorney fees, independent adjuster fees, and expert witness costs.
industryPublished 2026/06/07Last verified 2026/06/07
FAQs
- Are independent adjuster fees ALAE or ULAE?
- Independent adjuster fees are ALAE because they can be directly attributed to a specific claim file. Staff adjuster salaries, by contrast, are ULAE because they cannot be assigned to individual claims.
- Does ALAE count toward reinsurance treaty recoveries?
- Under most proportional and many excess-of-loss treaties, ALAE is included in the definition of loss and participates in treaty recoveries alongside indemnity. Treaty language varies, so each agreement must be reviewed carefully.
- How is ALAE used in ratemaking?
- ALAE is combined with indemnity losses to produce total loss costs, which are then trended and developed to estimate future losses. This ensures that expected legal and adjustment costs are incorporated into filed rates.
Related Terms
Unallocated Loss Adjustment Expense
Overhead claims handling costs not attributable to a specific claim, such as staff adjuster salaries, office overhead, and claims system costs.
Independent Adjuster
A claims professional working as an independent contractor hired by insurers on a fee or per-claim basis to investigate, evaluate, and settle claims.
Litigation Management
The carrier's structured process for controlling legal defense costs, outcomes, and strategies on claims that have entered the court system.
Claims Leakage
Measurable overpayment on claims relative to the theoretically correct settlement, resulting from process failures, errors, or inadequate investigation.