Loss ratio

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Loss ratio

The ratio of losses paid or accrued by an issurer to premiums collected over a year.

Loss Ratio

In insurance, the ratio of what an insurance company pays in benefits and associated expenses (such as adjustments) to what is collected in premiums, expressed as a percentage. It is calculated thusly:

Loss ratio = (Benefits paid out + Adjustment expenses) / Premiums collected

For example, if a company pays out $8,000,000 in benefits and adjustment and collects $10,000,000 in premiums, its loss ratio is 80%. Traditionally, the loss ratio has been used as a gauge for both an insurance company's financial health and whether it was overcharging policy holders. For example, a high loss ratio indicated that the company was not making a reasonable profit, while a low ratio showed that it was either charging too much or covering too little. However, this view has been criticized, at least in relation to health insurance, on the grounds that the integration of insurers and providers makes it difficult or impossible to calculate the ratio properly.
References in periodicals archive ?
The law allows state legislatures to set higher medical loss ratios than the minimum under the federal statute.
As a result, the loss ratios for the 1990-1997 accident years reported in the 1998 schedule use losses that are more developed than the ones taken from the annual statements accident years 1998 through 2005.
Advising agents with less than 3 percent growth and sub-20 percent loss ratios that they are not performing adequately.
For the companies examined here, the average company loss ratio varied from 58.
In other words, property/casualty underwriters can effectively freeze their loss ratios in advance.
Measurement of both pricing changes and loss ratio changes also sets CLIPS apart from other studies.
the second-largest writer of ocean marine in New Jersey, bucked the trend and its ocean marine adjusted loss ratio improved in 2012 to 76.
Although this idea was replaced by catastrophe derivatives based on indices of aggregate (multiline) losses, it nonetheless is of interest to compare the hedging effectiveness of the PCS catastrophe contracts with line-specific contracts based on industry results because industry loss ratios will capture sources of correlation in losses other than catastrophes.
Golden Rule says it expected to have a loss ratio of 60 percent from 2001 through June 2014 but had an actual incurred loss ratio of 66 percent.
Weather-related events certainly took a toll on auto physical damage adjusted loss ratios in 2012.
In New Hampshire, the medical loss ratio for the state risk pool is 140% of the standard-plan loss ratio.