What are accumulators in insurance?

In the context of insurance, accumulators typically refer to funds or accounts that are used to collect and track specific types of expenses or charges related to an insurance policy, such as claims incurred or medical costs. Here's how accumulators work in insurance:

Claims Accumulator:

- An insurance company may establish a claims accumulator for an insured individual under a health insurance policy or a casualty insurance policy.

- The purpose of the claims accumulator is to monitor and tally covered medical expenses or claim payments made on behalf of the insured during a specified period.

- As the insured incurs eligible medical expenses or losses covered by the policy, they are recorded in the claims accumulator.

- Once the accumulator reaches a predefined threshold or limit, it can trigger certain benefits or changes in coverage under the policy. For example, in a health insurance policy, reaching a specific amount in the claims accumulator may lower the insured's deductible or coinsurance for future medical expenses.

Expense Accumulator:

- This type of accumulator tracks specific policy-related expenses outside of direct claim payments.

- It may record administrative costs or fees associated with the provision of coverage or processing of claims.

- Accumulation of expenses in the expense accumulator can impact factors like the insurer's underwriting results, profitability, and premium rates.