FINANCIAL & ACCOUNTING TERMS
Acquisition costs definition
Acquisition costs are insurer expenses incurred to obtain business or new customers, including commissions, brokerage and taxes paid during policy acquisition.
In practice, this term covers costs incurred by an insurer or reinsurer when acquiring an asset, business or new customers. These costs may include commissions, brokerage fees and taxes paid, with commissions paid to intermediaries often making up the largest proportion.
This term is useful in insurance market analysis, policy wording and risk transfer decisions. It helps users interpret insurance terminology consistently across markets, policies and risk data, and compare how insurance is structured, regulated, priced or claimed across different markets.
Acquisition costs are closely related to commission, brokerage, deferred acquisition costs and premium rate.
At a glance
- Used in
- Insurance finance, underwriting, reporting, expense analysis and market analysis.
- Purpose
- Helps users understand the costs incurred when an insurer obtains insurance business or new customers.
- Important because
- Acquisition costs affect underwriting profitability, expense ratios, pricing analysis and the interpretation of insurance financial results.
- Related terms
- Deferred acquisition costs (DACs), Commission, Brokerage and Expense ratio.
Example of acquisition costs in insurance
An insurer launches a new commercial product and pays intermediaries commission to distribute the product. The commission, setup expenses and other costs linked to acquiring those policies are treated as acquisition costs.