Activity-based costing and process benchmarking: an application to general insurance

Delpachitra, Sarath (2008) Activity-based costing and process benchmarking: an application to general insurance. Benchmarking: An International Journal, 15 (2). pp. 137-147. ISSN 1463-5771

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Purpose – Aim of this paper is to set some cost benchmarks for the cost of processing an insurance application and processing a claim.
Design/methodology/approach – Activity-based costing (ABC) model. The ABC model was applied to a unified business process and set the benchmarks for the cost of processing an application and a claim.
Findings – The average cost per application is approximately AUD221 and the cost of processing a claim is AUD260. The cost of support functions is higher in the case of application processing and back office direct costs are higher in the case of claim processing.
Research limitations/implications – The success of benchmarking exercises depends on the cooperation of the benchmarking partners. Furthermore, the benchmarks can be more accurate when ABC is applied to the business processes. Most insurance providers are yet to adopt the ABC model.
Originality/value – This paper introduces the breakdown of the processing costs for general insurance. The breakdown is given on the basis of direct and indirect costs as well as front office, back office and support function costs. To the best of author’s knowledge this is the first application of process benchmarking to the insurance industry.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: This Author may be contacted by 61 7 46311624. Author's version deposited in accordance with the copyright policy of the publisher.
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 01 Apr 2009 11:37
Last Modified: 02 Jul 2013 23:08
Uncontrolled Keywords: activity based costs; benchmarking; insurance; organisational process
Fields of Research : 15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150311 Organisational Behaviour
14 Economics > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150204 Insurance Studies
Socio-Economic Objective: B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900103 Superannuation and Insurance Services
Identification Number or DOI: 10.1108/14635770810864857

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