The ratio of claims paid by an insurer to premiums collected, expressed as a percentage. A loss ratio of 60% means the insurer pays $60 in claims for every $100 in premiums. Regulators and analysts use loss ratios to assess insurer performance and pricing adequacy.
Related Terms
Claim
A formal request made by a policyholder to an insurance company for payment or reimbursement for a covered loss or policy event. Filing a claim triggers the insurer to investigate the loss, assess damages, and determine what amount is payable under the policy.
Premium
The amount you pay to an insurance company to maintain your coverage, typically billed monthly, quarterly, or annually. Premiums are determined by factors such as risk level, coverage amount, deductible, location, and claims history.
Actuary
A professional who uses mathematics, statistics, and financial theory to assess risk and set insurance premiums. Actuaries analyze historical data and probability models to predict future losses and ensure insurers can pay claims.