Loss Ratio Calculator
Calculate insurance company profitability and underwriting performance analysis
Calculate Insurance Loss Ratio
Total amount of premiums collected from policies
Total amount paid out for insurance claims
Costs to investigate and process claims
Loss Ratio Analysis
Excellent
Excellent loss ratio. The company has strong profitability.
Formula: Loss Ratio = (Claims Paid + Loss Adjustment Expenses) / Total Premiums Earned × 100
Calculation: (0 + 0) / 0 × 100 = 0.0%
Example Calculation
Company Alpha Insurance:
Total premiums earned: $10,000,000
Insurance claims paid: $3,500,000
Loss adjustment expenses: $1,800,000
Calculation: ($3,500,000 + $1,800,000) / $10,000,000 × 100 = 53%
Result: 53% loss ratio indicates average profitability
Loss Ratio Benchmarks
Excellent
Below 40%
Average
40% - 60%
Below Average
60% - 100%
Loss Making
Above 100%
Key Insurance Metrics
Loss Ratio: Claims and expenses vs premiums
Expense Ratio: Operating expenses vs premiums
Combined Ratio: Loss ratio + expense ratio
Claims Frequency: Number of claims per policy
Claims Severity: Average cost per claim
Understanding Loss Ratio
What is Loss Ratio?
Loss ratio, or underwriting loss ratio, represents the ratio of losses an insurance company incurs to the total premiums it earns from its policies. It measures how much it costs the insurance company to pay claims and related expenses compared to the premiums collected.
Components of Loss Ratio
- •Claims Paid: Direct payments to policyholders
- •Loss Adjustment Expenses: Costs to investigate and process claims
- •Premiums Earned: Revenue from insurance policies
Formula and Calculation
Loss Ratio = (Claims + Loss Adjustment Expenses) / Premiums × 100
Industry Applications
- Life Insurance: Typically 40-70% loss ratio
- Property & Casualty: Usually 50-80% loss ratio
- Health Insurance: Often 80-90% loss ratio
- Auto Insurance: Generally 60-80% loss ratio
Note: Acceptable loss ratios vary by insurance type and market conditions.