Projected Fixed Expense vs Additive Expense Fee
What is the difference between the projected fixed expenses and the projected fixed additive expense fee? I am trying to understand these calculations and why they are done this way but I'm not really understanding why the calculations are done this way. Conceptually and in general how do they differ?
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The projected fixed expense is the actual expense the insurer incurs for things like printing the policy forms. Let's say it's $100. But we don't just add $100 to the cost of the policy otherwise there would be no profit so the amount actually added to the cost of the policy is:
Then if
Then the projected fixed additive expense fee is: