Costs of acquisition include expenses related to conclusion and extension of insurance contracts. Direct acquisition costs include among others insurance agent commission costs, payroll costs related to conclusion of insurance contracts, costs of attestation, studies and research regarding risk accepted by the insurer. Indirect acquisition costs include advertisement and promotion of insurance products and costs related to analysis of applications and issuance of policies.
In order to ensure that costs and revenue are matched, acquisition costs are recognized over time.
Deferred acquisition costs capitalized in the statement of financial position, related both to non-life insurance as well as life insurance are tested for impairment by including adequacy of provisions.
3.13.1 Non-life insurance
Acquisition costs in the case of property and personal insurance products are deferred in line with the principles applicable at the time of determining the provision for unearned premiums and amortized under profit or loss (under “Acquisition expense”) during the period of the insurance cover.
3.13.2 Life insurance
In the case of life insurance products, for traditional individual insurance contracts with discretionary participation features acquisition costs are recognized over time based on the Zillmer method (life insurance, endowment and birth insurance).