Loss Ratio
Calculator
Results
- Loss ratio
- 67.5
- Pure loss ratio
- 62
- Underwriting margin
- 325,000
Insurance and risk results
| Loss ratio | 67.5 |
| Pure loss ratio | 62 |
| Underwriting margin | 325,000 |
formula-map diagram
- Loss ratio
- 67.5
- Pure loss ratio
- 62
- Underwriting margin
- 325,000
Coverage and risk relationship
Formula
Loss ratio = (incurred losses + LAE) ÷ earned premium= 67.5
Note
This is generic arithmetic using the amounts, rates and factors you entered. It is not an insurance quote, a policy interpretation, or financial advice. No insurer rate, jurisdiction rule, statutory limit or policy wording is built in. Real premiums and payouts depend on underwriting, your policy's exact terms and exclusions, and applicable regulation; confirm with your insurer or a licensed professional.
More in Insurance and risk
See all →Frequently asked questions
What does the loss ratio number actually mean?+
It's incurred losses divided by earned premium, expressed as a percentage: a 65% loss ratio means the insurer paid out 65 cents in claims for every dollar of premium earned, before accounting for expenses.
Is a lower loss ratio always better for the insurer?+
Generally yes for short-term profitability, but an unusually low loss ratio over time can attract regulatory scrutiny (implying overpriced premiums) or signal the insurer is being too conservative in underwriting or too slow to pay legitimate claims.
Does the loss ratio include the insurer's operating expenses?+
No, the pure loss ratio only reflects claims costs; expenses like commissions, administration, and marketing are captured separately and combined with the loss ratio in the broader combined ratio metric.
What's considered a healthy loss ratio?+
It varies by line of business, but many property and casualty insurers target 50-70% as sustainable, since the remaining percentage needs to cover operating expenses and still leave room for underwriting profit.
Why would a loss ratio exceed 100%?+
This happens when claims paid exceed premiums earned in that period, often due to a catastrophic event (major hurricane, pandemic-related claims) or systematic underpricing; insurers typically absorb this from reserves or reinsurance in the short term.