Understanding Pure Loss Ratio
How we calculate. Pure LR % = losses excluding loss adjustment expenses ÷ 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 Pure Loss Ratio case uses losses excluding lae 5850000 and earned premium 10000000. Enter the same figures below to reproduce the worked path.
What is Pure Loss Ratio?
Distinct from the all-in incurred loss ratio when LAE is excluded from the numerator. Useful when you want indemnity experience separate from claims handling cost.
- Exclude LAE from the numerator
- Earned premium denominator
- Pairs with LAE ratio and combined ratio
The Formula
Worked Example
Common Use Cases
- Pricing studies: indemnity-only LR
- LOB compare: strip handling noise
- Reserve reviews: pure vs all-in
Pro Tips
- Label ALAE inclusions carefully
- Don’t mix with written premium
- Cite beside standard loss ratio
Limitations: Pure 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
Different from loss ratio?
Standard loss ratio often includes incurred losses with LAE per your definition. Pure loss ratio excludes LAE from the numerator.
What if earned premium is 0?
Pure 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