Loss Ratio Calculator
Calculate loss ratio and combined ratio to see if a book underwrites at a profit.
Loss Ratio Calculator
Calculate your loss ratio and combined ratio to see whether a book is underwriting at a profit or a loss.
Underwriting and acquisition expenses as a percent of premium.
Combined ratio
93.0%
Underwriting profit $70,000
| Metric | Value |
|---|---|
| Loss ratio | 65.0% |
| Expense ratio | 28.0% |
| Combined ratio | 93.0% |
Estimate for planning only. A combined ratio under 100% means the book is profitable before investment income; over 100% means it is paying out more than it earns.
FAQs
- How do you calculate loss ratio?
- Loss ratio is incurred losses divided by earned premium, expressed as a percentage. If a book pays $650,000 in losses on $1,000,000 of earned premium, the loss ratio is 65%.
- What is the combined ratio?
- The combined ratio is the loss ratio plus the expense ratio. It shows total outflow as a percent of premium. Under 100% is an underwriting profit; over 100% is an underwriting loss.
- What is a good loss ratio?
- It depends on the line and the expense load, but many carriers target a combined ratio comfortably under 100%. A loss ratio in the 60s with controlled expenses typically supports profitability.
- Why does loss ratio matter to an agency?
- Carriers reward agencies with profitable books through better contracts, contingent commissions, and continued appointments. A high loss ratio can threaten your carrier relationships.
Related Terms
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.
Combined Ratio
A carrier profitability metric: incurred losses plus expenses divided by earned premium. Below 100% means underwriting profit; above means a loss.
Expense Loading
The component added to loss cost covering acquisition costs, general expenses, taxes, and profit margin to arrive at the final charged premium.
Underwriting Profit
The profit generated from insurance operations alone, calculated as earned premium minus incurred losses and expenses, before investment income.