Loss ratio

Loss ratio

Loss Ratio in insurance is the ratio of total losses paid out in claims plus adjustment expenses divided by the total earned premiums. If an insurance company, for example, pays out $60 in claims for every $100 in collected premiums, then its loss ratio is 60%.

Loss ratios for health insurance can range from 60% to 110%. Loss ratios for property & casualty insurance (e.g. automobile insurance, typically range from 40% to 60%. . Overly low loss ratios are seen as evidence that an insurance company is overcharging and making excess profits. It is collecting much more in premiums than it needs to cover claims. Overly high loss ratios are seen as evidence that an insurance company is in poor financial health. It is not collecting enough premiums to cover claims, pay expenses and make a reasonable profit.

References

Search another word or see loss ratioon Dictionary | Thesaurus |Spanish
Copyright © 2014 Dictionary.com, LLC. All rights reserved.
  • Please Login or Sign Up to use the Recent Searches feature