What is typically an insurer's objective when determining acquisition costs?

The primary objective of an insurer when determining acquisition costs is to reduce the cost of doing business and acquiring premiums. Acquisition costs involve expenses that an insurance company incurs to obtain new business, such as marketing, advertising, underwriting, and commissions paid to brokers or agents. By effectively managing and lowering these costs, insurers can improve their profitability, allowing them to offer more competitive premiums to customers and maintain a sustainable business model.

In the insurance industry, keeping acquisition costs in check is vital because high costs can erode profit margins even when there is strong revenue from premiums. Therefore, insurers strive to find efficient ways to attract new clients while balancing the necessary expenditures associated with these efforts. This focus on cost reduction helps them to price their products more attractively and increase market share.

The other options do not directly align with the fundamental financial objectives concerning acquisition costs. Maximizing payouts on claims is more about managing claims expenses rather than acquisition strategies. Ensuring all claims are valid relates to fraud prevention and doesn’t focus on the cost of acquiring new customers. Increasing broker commissions might be part of the total acquisition cost but does not encapsulate the insurer's overall goal of cost management and premium acquisition.