What does DAC mean in ACCOUNTING
Deferred Acquisition Cost (DAC) is an accounting term used by insurance companies to refer to the cost of acquiring a new policyholder. DAC is comprised of various costs associated with the sale of a policy, such as commissions, taxes, and costs associated with servicing or issuing the policy.
DAC meaning in Accounting in Business
DAC mostly used in an acronym Accounting in Category Business that means Deferred Acquisition Cost
Shorthand: DAC,
Full Form: Deferred Acquisition Cost
For more information of "Deferred Acquisition Cost", see the section below.
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Essential Questions and Answers on Deferred Acquisition Cost in "BUSINESS»ACCOUNTING"
What is Deferred Acquisition Cost (DAC)?
Deferred Acquisition Cost (DAC) refers to the cost of acquiring a new policyholder and includes various costs such as commissions, taxes, servicing or issuing the policy.
How does Deferred Acquisition Cost (DAC) impact insurers?
DAC impacts insurers' bottom line because it increases their total cost base. This can lead to higher premiums for consumers and/or lower profits for the insurer.
Where does the money for Deferred Acquisition Cost come from?
The funds for DAC generally come from a variety of sources, including fees paid by reinsurers and upfront payments made by policyholders at issuance.
Does Deferred Acquisition Cost differ from regular acquisition costs?
Yes, regular acquisition costs are those which are incurred at regular intervals during a contract period while DAC accumulates over time as policies remain in force.
Is there any way to minimize Deferred Acquisition Cost?
Generally speaking, insurers can minimize DAC by making investments in technology that optimize efficiency when underwriting and administering policies and increase sales productivity among agents. Additionally, adjusting pricing strategies may also help reduce DAC expense over time.
Final Words:
In summary, Deferred Acquisition Cost (DAC) is an important accounting term used by insurance companies in determining their total cost base related to acquiring new policyholders. By understanding how these costs accumulate over time and investing in technologies that optimizes efficiencies, insurers can better manage their expenses associated with obtaining new customers and be better equipped to offer competitive prices on policies.
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