The fixed expense per policy of $7.20 is an average expense over all
insureds (6.4% of total premium). Because of the percentage allocation
method used in the old rate structure (no expense fees), there are
variations in how much each insured paid of the total fixed expenses of
$21.63. The exercise removes those variations by forcing an explicit fixed
charge for fixed expenses per insured of $7.20
Before, fixed expenses were paid by each insured as an implicit fixed
percent of premium, and the actual dollar charge varied. Now, fixed
expenses are paid as an explicit fixed dollar amount per policyholder,
which varies as a percent of premium per insured. However, the fixed
expenses still are 6.4% of the total premium collected (7.20 * 3 / 337).
The $68 does not cover ALL expected loss and variable expenses. The $68
plus the variable portion of the expense fee charge does cover all expected
loss and variable expenses - this is the $2.80 above the $7.20 expense
portion of the expense fee.
BTW, if there were an Insured D with the limits as you specified, the
expense fee provision would change to $9. His premium increase is explained
by the fact that the fixed expenses associated with his policy are no
longer being subsidized by insureds who have a higher premium.