Definition - What does Administrative Charge mean?
An administrative charge is a charge that an insurer requires its clients to pay to cover the costs of various administrative activities related to the maintaining of the insurance account for certain types of policies. These administrative activities can include such activities as record keeping, data filing, and so on.
Administrative charges are also known as administrative fees.
Insuranceopedia explains Administrative Charge
Without administrative charges, insurers would have to dip into premium profits to pay its employees who take care of various administrative tasks. Therefore, they simply require clients to pay administrative charges, which are typically billed on a quarterly or annual basis, for policies like group employee benefit plans. This helps the insurer maintain these policies without necessarily relying on premiums.
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