Loss Ratio
The portion of premium paid out in claims: incurred losses divided by earned premium. A core measure of how a book of business is performing.
businessPublished 2026/06/05
FAQs
- What's a good loss ratio?
- It varies by line, but lower is better for the carrier; the target depends on the expense ratio, since both together must stay under 100% for underwriting profit.
- Why do AI vendors cite loss-ratio improvement?
- Because even a small loss-ratio reduction compounds to large dollar savings at scale, making it the clearest way to quantify ROI.
Related Terms
Combined Ratio
A carrier profitability metric: incurred losses plus expenses divided by earned premium. Below 100% means underwriting profit; above means a loss.
Predictive Underwriting
Predictive underwriting uses machine learning on historical and external data to forecast a risk's likely loss outcome, helping underwriters price and select
Fraud Detection
The use of AI and data analytics to identify suspicious or fraudulent insurance claims and applications, flagging anomalies for investigation before payout.