What Are Allocated Loss Adjustment Expenses (ALAE)?

Allocated loss adjustment expenses (ALAE) are costs attributed to the processing of a specific insurance claim. ALAE is part of an insurer’s expense reserves. It is one of the largest expenses for which an insurer has to set aside funds, along with contingent commissions.

Understanding Allocated Loss Adjustment Expenses (ALAE)

Allocated loss adjustment expenses, along with unallocated loss adjustment expenses (ULAE), represent an insurer’s estimate of the money it will pay out in claims and expenses. Insurers set aside reserves for these expenses to ensure claims aren’t made fraudulently and to process legitimate claims quickly.

ALAEs link directly to the processing of a specific claim. These costs may include payments to third parties for activities like investigating claims, acting as loss adjusters, or as legal counsel for the insurer. Expenses associated with ULAE are more general and may include overhead, investigations, and salaries.

Life insurance companies that use in-house employees for field adjustments would report that expense as an unallocated loss adjustment expense.

Special Considerations

Some commercial liability policies contain endorsements, which require the policyholder to reimburse its insurance company for loss adjustment expenses (ALAE or ULAE). Adjusting a loss is “the process of ascertaining the value of a loss or negotiating a settlement.”

Therefore, loss adjustment expenses are most often those costs incurred by an insurance company in defending or settling a liability claim brought against its policyholder. These expenses can include fees charged by attorneys, investigators, experts, arbitrators, mediators, and other fees or expenses incidental to adjusting a claim.

It is important to carefully read the endorsement language, which may say that a loss adjustment expense is not intended to include the policyholder’s attorney fees and costs if an insurer denies coverage and a policyholder successfully sues the insurer. In this situation, where the insurance company has done no actual “adjusting” of the claim, it should not be entitled to apply its deductible to the expenses incurred by the policyholder in defending the claim abandoned by the insurance company.

ALAE vs. Unallocated Loss Adjustment Expenses (ULAE)

Insurers have gradually shifted from categorizing expenses as ULAE to categorizing them as ALAE. This is primarily because insurers are more sophisticated in how they treat claims and have more tools at their disposal to manage the costs associated with claims.

Small, straightforward claims are the easiest for an insurance company to settle and often require less ALAE when compared to claims that may take years to settle. Claims that could result in substantial losses are the most likely to receive extra scrutiny by insurers and may involve in-depth investigations, settlement offers, and litigation. With greater scrutiny comes greater cost.

Analysts can tell how accurate an insurance company has been at estimating its reserves by examining its loss reserve development. Loss reserve development involves an insurer adjusting estimates to its loss and loss adjustment expense reserves over a period of time.

What Is Agribusiness?

Agribusiness is the business sector encompassing farming and farming-related commercial activities. It involves all the steps required to send an agricultural good to market, namely production, processing, and distribution. This industry is an important component of the economy in countries with arable land since agricultural products can be exported.

Agribusiness treats the different aspects of raising agricultural products as an integrated system. Farmers raise animals and harvest fruits and vegetables with the help of sophisticated harvesting techniques, including the use of GPS to direct operations. Manufacturers develop increasingly efficient machines that can drive themselves. Processing plants determine the best way to clean and package livestock for shipping. While each subset of the industry is unlikely to interact directly with the consumer, each is focused on operating efficiently in order to keep prices reasonable.

Understanding Agribusiness

Market forces have a significant impact on the agribusiness sector, as do natural forces, such as changes in the earth’s climate.

• Changes in consumer taste alter what products are grown and raised. For example, a shift in consumer tastes away from red meat may cause demand—and therefore prices—for beef to fall, while increased demand for produce may shift the mix of fruits and vegetables that farmers raise. Businesses unable to rapidly change in accordance with domestic demand may look to export their products abroad. If that fails, they may not be able to compete and remain in business.
• Climate change has placed intensifying pressure on many companies in the agribusiness industry to remain relevant, and profitable, while adapting to the threats posed by large-scale shifts in weather patterns.

Agribusiness Challenges

Countries with farming industries face consistent pressures from global competition. Products such as wheat, corn, and soybeans tend to be similar in different locations, making them commodities. Remaining competitive requires agribusinesses to operate more efficiently, which can require investments in new technologies, new ways of fertilizing and watering crops, and new ways of connecting to the global market.

Global prices of agricultural products may change rapidly, making production planning a complicated activity. Farmers may also face a reduction in usable land as suburban and urban areas expand into their regions.

Use of New Technology

The use of new technology is vital to remain competitive in the global agribusiness sector. Farmers need to reduce crop costs and increase yield per square acre to remain competitive.

New drone technology is at the cutting edge of the industry. An article published in 2016 by the Massachusetts Institute of Technology (MIT) identified Six Ways Drones Are Revolutionizing Agriculture. These techniques, including soil and field analysis, planting, and crop monitoring, will be key to improving crop yields and moving the agribusiness sector forward.

Key areas of concern for the use of drone technology remain the safety of drone operations, privacy issues, and insurance-coverage questions.

Agribusiness Examples

Because agribusiness is a broad industry, it incorporates a wide range of different companies and operations. Agribusinesses include small family farms and food producers up to multinational conglomerates involved in the production of food on a national scale.

Some examples of agribusinesses include farm machinery producers such as Deere & Company, seed and agrichemical manufacturers such as Monsanto, food processing companies such as Archer Daniels Midland Company, as well as farmer’s cooperatives, agritourism companies, and makers of biofuels, animal feeds, and other related products.

What Is 3D Printing?

Three-dimensional (3D) printing is an additive manufacturing process that creates a physical object from a digital design. The process works by laying down thin layers of material in the form of liquid or powdered plastic, metal or cement, and then fusing the layers together.

Understanding 3D Printing

Since it was introduced, 3D printing technology has already increased manufacturing productivity. In the long-term, it has the potential to massively disrupt both the manufacturing, logistics, and inventory management industries, especially if it can be successfully incorporated into mass production processes.

Currently, 3D printing speeds are too slow to be used in mass production. However, the technology has been used to reduce the lead time in the development of prototypes of parts and devices, and the tooling needed to make them. This is hugely beneficial to small-scale manufacturers because it reduces their costs and the time to market, that is, the amount of time from a product being conceived until its being available for sale.

3D printing can create intricate and complex shapes using less material than subtractive manufacturing processes, such as drilling, welding, injection molding, and other processes. Making prototypes faster, easier, and cheaper allows for more innovation, experimentation, and product-based startups.

Industrial Uses

Car and aircraft manufacturers have taken the lead in 3D manufacturing, using the technology to transform unibody and fuselage design and production, and powertrain design and production. Boeing is using 3D-printed titanium parts in the construction of its 787 Dreamliner airliner. In 2017, General Electric created a helicopter engine with 16 parts instead of 900–an indication of how big an impact 3D printing could potentially have on supply chains.

In medical sciences, 3D printing is being used to customize implants. In the future, organs and body parts may be created using 3D printing techniques. In the fashion world, Nike, Adidas, and New Balance are using 3D printing to create their shoes. In the construction industry, companies around the world are making breakthroughs in 3D printing of the materials need to build homes. Using layers of concrete, homes can be built in 24 hours, which are stronger than regular cinder blocks and cost a fraction of the price.

In the manufacturing of hearing aids, 3D printing is now customary. The use of 3D printing accelerates the process of manufacturing and enables manufacturers to make custom hearing aids. Audiologists can use 3D scanners to create a custom prototype using reference points from the scan. Manufacturers can feed the scan into a 3D printing machine and after fine-tuning the materials and the ear shapes, print the entire hearing aids.

What Is the American Dream?

The American dream is the belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society in which upward mobility is possible for everyone.

The American dream is believed to be achieved through sacrifice, risk-taking, and hard work, rather than by chance.

Understanding the American Dream

The term was coined by writer and historian James Truslow Adams in his best-selling 1931 book Epic of America. He described it as “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.”

Adams went on to explain, “It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motorcars and high wages merely, but a dream of social order in which each man and woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

The idea of the American dream has much deeper roots. Its tenets can be found in the Declaration of Independence, which states: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.”

In a society based on these principles, an individual can live life to its fullest as they define it. America also grew mostly as a nation of immigrants who created a nation where becoming an American—and passing that citizenship to your children—didn’t require being the child of an American.

Advantages and Disadvantages of the American Dream

Advantages

Achieving the American dream requires political and economic freedom, as well as rules of law and private property rights. Without them, individuals cannot make the choices that will permit them to attain success, nor can they have confidence that their achievements will not be taken away from them through arbitrary force.

The American dream promises freedom and equality. It offers the freedom to make both the large and small decisions that affect one’s life, the freedom to aspire to bigger and better things and the possibility of achieving them, the freedom to accumulate wealth, the opportunity to lead a dignified life, and the freedom to live in accordance with one’s values—even if those values are not widely held or accepted.

The books of post-Civil War writer Horatio Alger, in which impoverished but hardworking teenage boys rise to success through pluck, determination, and good fortune, came to personify realizing the Dream.

Disadvantages

Terming it a “dream” also carries with it the notion that these ideals aren’t necessarily what has played out in the lives of many actual Americans and those who hope to become Americans. The criticism that reality falls short of the American dream is at least as old as the idea itself. The spread of settlers into Native American lands, slavery, the limitation of the vote (originally) to white male landowners, and a long list of other injustices and challenges have undermined the realization of the dream for many who live in the United States.

As income inequality has increased substantially since the 1970s, the American dream has begun to seem less attainable for those who aren’t already affluent or born into affluence. According to U.S. Census family income data, real family income began to grow much more among the top income group than among other segments of American society.

These realities, however, do not diminish the luster of the American dream as an ideal and a beacon to all nations.

How to Measure the American Dream

Today, homeownership is frequently cited as an example of attaining the American dream. It is a symbol of financial success and independence, and it means the ability to control one’s own dwelling place instead of being subject to the whims of a landlord. Owning a business and being one’s own boss also represents the American dream fulfillment. In addition, access to education and healthcare have been cited as elements of the Dream.

Homeownership has steadily increased over time in the U.S., reflecting a key aspect of owning your own property as a sign of achieving the American Dream. For example, the homeownership rate at the end of 2020 was 65.8%, reflecting an increase of 0.7% higher than the previous year. Entrepreneurship has always been important to the U.S. economy too. In 2019, small businesses created 1.6 million net jobs alone.

Owning property, one’s own business, and carving a life of one’s own making is all part of the American dream, and the U.S. as a first-world country also offers the benefits of pursuing these passions, without having to worry about basics such as accessing good education and healthcare.

Special Considerations

In her book Spreading the American Dream: American Economic and Cultural Expansion, 1890-1945, sociologist Emily S. Rosenberg identifies five components of the American dream that have shown up in countries around the world. These include the following:

• The belief that other nations should replicate America’s development
• Faith in a free market economy
• Support for free trade agreements and foreign direct investment
• Promotion of a free flow of information and culture
• Acceptance of government protection of private enterprise

The American dream was aided by a number of factors that gave the United States a competitive advantage over other countries. For starters, it is relatively isolated geographically, compared to many other countries, and enjoys a temperate climate. It has a culturally diverse population that businesses use to foster innovation in a global landscape. Abundant natural resources—including oil, arable land, and long coastlines—generate food and income for the country and its residents.

The Bottom Line

The concept of the American dream is still one of the most uniquely “American” ideals—the ultimate idea that any individual should be able to pursue their dreams and build the life they want if they put in the hard work. This motivating drive influences the economy with entrepreneurship and individual ambition, infusing a romantic notion to anyone trying to be successful in the United States. Though the definition of the American Dream has changed to mean different things to different generations, it’s undoubtedly part of the American ethos, and always will be.