loss ratio
Noun: - A financial metric in insurance: The loss ratio is the ratio of incurred losses and loss adjustment expenses to earned premiums, typically expressed as a percentage. It measures an insurance company's profitability from its underwriting activities by comparing what it pays out in claims to what it receives in premiums.
The term is used primarily in the context of insurance, finance, and business analysis to assess the performance and financial health of an insurance provider or a specific line of insurance business. - The company's high loss ratio for auto insurance indicates it paid out nearly all the premiums it collected in claims. - Analysts watch the loss ratio closely; a ratio consistently over 100% means the insurer is paying out more in claims than it earns in premiums.
- Combined Ratio: A broader metric that adds the loss ratio and the expense ratio (costs of acquiring and servicing policies). A combined ratio under 100% indicates an underwriting profit.
- While the loss ratio was favorable, a high expense ratio pushed the combined ratio above 100%.
- Expense Ratio (noun): The ratio of underwriting expenses to earned premiums.
- Combined Ratio (noun): The sum of the loss ratio and the expense ratio.
- Underwriting Result (noun): The profit or loss from insurance underwriting, directly influenced by the loss ratio.
- Claims ratio (noun): A term often used interchangeably with loss ratio.
- Underwriting loss ratio (noun): Emphasizes the metric's role in evaluating underwriting performance.
- Premium (noun): The amount paid for an insurance policy.
- Incurred Losses (noun): Losses that have happened and are obligated to be paid, whether already paid or reserved for future payment.
- Earned Premium (noun): The portion of the premium for which the insurance coverage period has already passed.
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the ratio of the annual claims paid by an insurance company to the premiums received
