Loss Adjustment Expense

Loss Adjustment Expense (LAE) refers to the costs an insurance company incurs to investigate, evaluate, settle, and process claims. This includes expenses like paying claims adjusters, attorneys, and other professionals involved in handling the claim. LAE is part of the overall cost of managing claims and ensuring fair resolution. It can be split into two categories: allocated LAE, directly related to specific claims, and unallocated LAE, which covers general claims handling expenses not tied to individual cases. Understanding LAE helps assess an insurer’s efficiency and the true cost of claims handling.