Loss Ratio Calculator
Calculate Insurance Loss Ratio & Combined Ratio
Calculate loss ratio and combined ratio to measure insurance underwriting profitability and operational efficiency.
Input Insurance Data
$
Total claims paid + loss reserves
$
Premiums earned during the period
Formulas
Loss Ratio = (Incurred Losses / Earned Premiums) × 100
A lower loss ratio indicates better underwriting performance
Industry Benchmarks
Loss Ratio:
- Excellent: < 40%
- Good: 40-60%
- Average: 60-75%
- Poor: > 75%
Combined Ratio:
- < 100%: Profitable
- = 100%: Break-even
- > 100%: Unprofitable
Understanding Loss Ratio
The loss ratio measures the relationship between incurred losses and earned premiums. It's a key metric for evaluating insurance company profitability and pricing adequacy.
Key Components:
- Incurred Losses: Claims paid + outstanding reserves
- Earned Premiums: Portion of premiums earned during period
- LAE: Costs to investigate and settle claims
- Underwriting Expenses: Commissions, salaries, overhead
Combined Ratio Explained
The combined ratio is the sum of the loss ratio and expense ratio. It measures the overall underwriting profitability before considering investment income.
Interpretation:
- < 100%: Underwriting profit (good)
- = 100%: Break-even point
- > 100%: Underwriting loss (may still be profitable with investment income)
- Industry Average: Typically 95-105%
Applications & Use Cases
For Insurance Companies:
- Evaluate underwriting performance
- Set premium pricing strategies
- Assess profitability by line of business
- Monitor claims management efficiency
- Compare performance across regions
For Investors & Analysts:
- Evaluate insurance company health
- Compare insurers in same market
- Assess operational efficiency
- Predict future profitability
- Identify underwriting trends
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