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 ?
medical loss ratio to be constitutional under any number of avenues, as
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These models measure the elasticity of the loss ratio with respect to changes in either premium volume or claim counts.
Advising agents with less than 3 percent growth and sub-20 percent loss ratios that they are not performing adequately.
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For other types of residual market plans - joint underwriting associations, reinsurance facilities and a state fund - the total calendar-year loss ratio of 113.
Gallup: The medical director of an HMO is too far removed from the day-to-day practice of the physicians to really have much of an influence, That's one of the reasons HMOs haven't been able to manage the medical loss ratios as well as IPAs, which are more decentralized and can more directly affect the medical loss ratio.
Their loss ratios were much higher, so combined, our loss ratio has gone up.
the quarter's loss ratio was 80 percent), then the index would have a value of $20,000 (before being adjusted for reporting lags, which will be discussed later).
The market's loss ratio improved significantly due to hardened rates