Understanding Loss Ratio
How we calculate. Loss ratio % = incurred losses ÷ earned premium × 100. The form uses the same arithmetic as the worked examples on this page. See our methodology and accuracy policy.
Real-world scenario: A typical Loss Ratio case uses incurred losses 6500000 and earned premium 10000000. Enter the same figures below to reproduce the worked path.
What is Loss Ratio?
A core underwriting profitability KPI. Lower is generally better; definitions of “incurred” (paid + reserves) must match your statutory or management report.
- Same book and period for both inputs
- Earned premium—not written—unless you label written loss ratio
- Pairs with expense and combined ratios
The Formula
Worked Example
Common Use Cases
- Underwriting reviews: book profitability
- Product pricing: loss experience
- Board packs: segment loss trends
Pro Tips
- State paid vs incurred
- Watch reserve strengthening spikes
- Don’t mix currencies
Limitations: Loss Ratio results are educational insurance and agency planning aids—not underwriting, actuarial, claims, or financial advice. Confirm statutory definitions with your carrier, regulator, and finance teams.
FAQ
Written or earned premium?
Standard loss ratio uses earned premium. Written premium needs a labeled written loss ratio.
What if earned premium is 0?
Loss ratio is undefined—enter positive earned premium.
Authoritative References
For insurance ratio and reporting concepts, consult:
- NAIC — U.S. insurance regulatory resources
- Casualty Actuarial Society — actuarial education resources
- Insurance Information Institute — industry explainers