# Sector-Specific KPIs in Service Costing

Service industries cannot use a single universal cost unit — each sector uses Key Performance Indicators (KPIs) tailored to its operations.

## Education Sector KPIs

KPI	What It Measures
Instructional Costs	Total cost of part-time and full-time faculty
Administrative Costs Per Student	Total admin spend ÷ Number of students
Tuition Costs	Fee charged per semester or year
Student-to-Faculty Ratio	Total students ÷ Total faculty (campus-wide or by department)

## Insurance Sector KPIs

KPI	What It Measures
Gross Revenue Retention (GRR)	Customer retention quality — factors in price increases and organic growth
Average Cost Per Claim	Total claim costs ÷ Number of claims
Components of Claim Costs (CCC)	Legal fees + time to settle + admin costs + report delays
Cost Per Quote	Cost incurred to generate one potential client quote
Administrative Costs Per Policy	Admin cost ÷ Number of policies outstanding
Average Policy Size	Total premium collected ÷ Number of policies issued

## Why KPIs Matter in Service Costing

Benchmark performance against industry norms
Identify cost inefficiencies specific to each sector
Support pricing decisions with sector-relevant data
Aid in budgetary control and performance reporting

Worked example

### Example 1

An insurance company processes 5,000 claims annually at a total cost of ₹25,00,000. Average Cost Per Claim = ₹25,00,000 ÷ 5,000 = ₹500 per claim. If the industry benchmark is ₹450, management must investigate why costs are 11% above benchmark — this could be due to excessive legal fees (a CCC component).

### Example 2

A college has 3,000 students and 100 faculty. Student-to-Faculty Ratio = 30:1. Total administrative spend = ₹60,00,000. Administrative Cost Per Student = ₹60,00,000 ÷ 3,000 = ₹2,000 per student. If a comparable institution spends ₹1,500 per student, management should review administrative efficiency.

⚠️ Common exam mistakes

Confusing Average Cost Per Claim with Components of Claim Cost (CCC) — CCC breaks down the elements of each claim; average cost is the overall per-claim figure.
Treating Gross Revenue Retention (GRR) as a general revenue metric — it specifically measures customer retention quality, not absolute revenue.
Including administrative or non-teaching staff in the Student-to-Faculty Ratio denominator — only teaching faculty are counted.
Applying education-sector KPIs to insurance contexts and vice versa in exam questions — always match the KPI to the correct industry.

Reference:

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Sector-Specific KPIs - Education and Insurance

Worked example

⚠️ Common exam mistakes