Management Control in Insurance Industry

Massimiliano Maggioni and Giuseppe Turchetti
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Massimiliano Maggioni: University of Milano
Giuseppe Turchetti: Sant’Anna School of Advanced Studies

Chapter 33 in Fundamentals of the Insurance Business, 2024, pp 719-736 from Springer

Abstract: Abstract This chapter has the purpose of explaining the importance of management control within a modern insurance undertaking. Starting from the generic definition of cost, costs by type are illustrated. Three possible classifications are considered: fixed versus variable costs, direct versus indirect costs and standard versus effective costs. In addition, the difference between configurations of direct cost and full cost is explained. The passage from costs by type to cost per intended use takes place thanks to the concept of a centre of responsibility. This centre can be further classified into centre of cost, centre of revenue and centre of profit. Continuing along this line of thinking, cost centres in their turn are classified on the basis of their characteristic activity: centre of organisational costs, centre of project costs and centre of pooled costs. Finally, the three procedures to determine a full cost (attribution, allocation and imputation of costs) are explained. At the end of the chapter, the methods of Activity-Based Costing (ABC) and Activity-Based Management (ABM) are illustrated. They represent a different way than the traditional one for attributing, allocating and charging costs.

Keywords: Management control; General accounting; Analytical accounting; Industrial accounting; Variable vs fixed costs; Direct vs indirect costs; Specific vs common costs; Standard vs effective costs; Direct vs full costs; Centre of responsibility; Cost centre; Revenue centre; Profit centre; Centre of organisational costs; Project cost centre; Pool cost centre; Corporate centre; Production centre; Service centre; Attribution stage; Allocation stage; Cycle of allocation; Driver or basis of allocation; Imputation stage; Activity-based costing (ABC); Resource driver; Activity driver; Activity-based management (ABM) (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/978-3-319-52851-9_33

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