1. What is a Loss Ratio Calculator?

Definition: This calculator determines the loss ratio percentage, which measures an insurance company's profitability by comparing claims and expenses to premiums earned.

Purpose: It helps insurance professionals and analysts assess underwriting performance and financial health.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Incurred Losses — Total claims paid plus reserves for future claims
• Adjustment Expenses — Costs to investigate and settle claims
• Earned Premiums — Portion of premiums that applies to the expired period of coverage

Explanation: The sum of losses and expenses is divided by earned premiums and multiplied by 100 to get a percentage.

3. Importance of Loss Ratio Calculation

Details: A lower ratio indicates better profitability. Ratios below 100% mean premiums exceed losses, while ratios above 100% indicate underwriting losses.

4. Using the Calculator

Tips: Enter all amounts in the same currency. Earned premiums must be greater than zero. Results are shown as percentages.

5. Frequently Asked Questions (FAQ)

Q1: What's a good loss ratio?
A: Typically 60-75% is considered healthy. Below 60% may indicate overpricing, above 75% may indicate underpricing.

Q2: How is this different from combined ratio?
A: Combined ratio includes all expenses (not just adjustment expenses) and is also expressed as a percentage.

Q3: Should I include investment income?
A: No, loss ratio focuses only on underwriting performance, not investment returns.

Q4: What time period should I use?
A: Typically annual, but can calculate for any period if all figures cover the same timeframe.

Q5: How do I find earned premiums?
A: Earned premiums = Written premiums + Unearned premium at start of period - Unearned premium at end of period.