Loss adjustment expense is best described as?

• A. Cost to investigate, defend, and settle claims.
• B. Total amount of loss reserves of all claims.
• C. Paid portion of claims.
• D. Total incurred amount of claims.

Answer: (A)

Loss adjustment expense describes the costs involved in getting a claim resolved, not the money paid to claimants. It covers activities like investigating the loss, defending the claim (including legal fees), and settling it. This is why it’s the best description: LAE is specifically about the expenses tied to adjusting and settling claims, rather than the actual payments or the reserves set aside for losses. It’s typically divided into allocated loss adjustment expenses (directly tied to a specific claim) and unallocated loss adjustment expenses (general claims department overhead).