Loss ratio

(redirected from Loss Ratios)
Also found in: Dictionary, Thesaurus.

Loss ratio

The ratio of losses paid or accrued by an issurer to premiums collected over a year.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
The higher average BIF loss ratios of the banks undercapitalized for longer periods may reflect sharp declines in assets in their last year, rather than losses on investments in riskier assets.
A DFS investigation found that between 2011 and 2017, Arch issued 3,332 blanket accident and health insurance policies to 628 New York firefighter companies and failed to comply with the minimum loss ratio standard required by New York insurance regulation, which provides that the premiums must be reasonable in relation to the claims paid under a policy.
* In Part 1, the authors present overall loss ratio, expense ratio and combined ratio results from statutory filings of the three insurers.
Insurance departments that favor the approach, by contrast, appear to embrace the notion that there is more than one way to skin a cat--meaning the lifetime loss ratio methodology favored by insurers is not the only appropriate way to calculate loss ratios.
But in the end, policymakers compromised by including incentives to strengthen states' health insurance rate review programs and by establishing a federal medical loss ratio requirement.
Life insurance penetration is low in the GCC, and typically represents low insurance risk and generally low loss ratios. Losses have occasionally been higher in health insurance.
have implemented minimum medical loss ratios for years to rein in rising
In New Hampshire, the medical loss ratio for the state risk pool is 140% of the standard-plan loss ratio.
New Hampshire health insurers have been granted a temporary exemption on the minimum medical loss ratio required as part of the federal Affordable Care Act, but it wasn't quite the exemption they were looking for.
Under the medical loss ratio provisions, large employers, and employees who contribute to premiums, will be entitled to retroactive premium refunds if their carrier spends less than 85 percent of premiums for reimbursement of clinical care and on "activities to improve health care quality."
While increasing the workload of the existing staff may improve the expense ratio, it may do so at the cost of having higher loss ratios and adverse reserve development.
Agents are boiling over with frustration at carriers who are focused entirely on growth regardless of loss ratio. Agents know they can grow slowly and profitably, or they can grow quickly with higher loss ratios.