The losses of allotment of profit are simplicity, equity, suitability, popularity and flexibility.
- Simplicity: It is desirable from the expenses point of view and from understanding point of view.
- Equity: The most important principle is ‘Equity’. Due weightage should be given to each policyholder according to his contribution to surplus. But in practice, this cannot be rigidly adhered to. So, a broad equity or rough justice in distribution of divisible surplus is taken into account.
- Suitability: A system of distribution of surplus should be suitable according to the nature, size and age of the insurance business.
- Popularity: The system should not be confirmed merely to the actuarial understanding but it should be popularly known to the policyholders.
- Flexibility: The better system of divisible profit will be that which can be change or altered according to the requirement.
In practice hundred per cent equity is not possible. So the flexibility, simplicity and popularity are generally practiced.