What this calculator does
The loss ratio is one of the core measures of an insurer's underwriting performance: it states claims paid as a percentage of premiums earned over the same period. A loss ratio of 65% means that for every dollar collected in premiums, 65 cents went out again in claims, leaving 35 cents to cover operating expenses, commissions and profit.
This is a different figure from a "win loss ratio" in sports or gaming, which compares how often a team or player wins against how often they lose. If that is what you are after, use the win/loss percentage calculator instead. This page covers the insurance meaning: claims paid divided by premiums earned.
The formula
Divide total claims paid by total premiums earned over the same period, then express that as a percentage. The underwriting margin shown alongside it is simply 100% minus the loss ratio, the share of each premium dollar left before expenses and profit are taken out.
| Term | Meaning |
|---|---|
| Loss ratio | Claims paid as a percentage of premiums earned: (claims ÷ premiums) × 100. |
| Claims paid | The total amount an insurer paid out in claims over the period being measured. |
| Premiums earned | The portion of collected premiums that corresponds to the coverage period already provided. |
The inputs explained
| Field | What to enter |
|---|---|
| Claims paid ($) | Total claims paid out over the period being measured. |
| Premiums earned ($) | Total premiums earned over that same period. |
When to use it
Judging underwriting performance
A loss ratio consistently above 100% means an insurer is paying out more in claims than it collects in premiums, before expenses are even considered, which is unsustainable without other income to offset it.
Pricing a policy or line of business
Comparing the loss ratio on a specific line of business against the insurer's target range shows whether premiums are set correctly for the risk being covered.
Comparing insurers or portfolios
Loss ratio is one of the standard figures analysts use to compare how conservatively or aggressively different insurers, or different books of business within the same insurer, are being priced.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How the loss ratio changes as claims paid increase, at fixed premiums earned
A fixed $100,000 in premiums earned, against a range of claims-paid totals.
| Claims paid | Loss ratio | Underwriting margin before expenses |
|---|---|---|
| $40,000 | 40.0% | 60.0% |
| $55,000 | 55.0% | 45.0% |
| $65,000 | 65.0% | 35.0% |
| $75,000 | 75.0% | 25.0% |
| $90,000 | 90.0% | 10.0% |
| $110,000 | 110.0% | -10.0% |
How the loss ratio changes as premiums earned increase, at fixed claims paid
A fixed $65,000 in claims paid, against a range of premiums-earned totals.
| Premiums earned | Loss ratio | Underwriting margin before expenses |
|---|---|---|
| $50,000 | 130.0% | -30.0% |
| $65,000 | 100.0% | 0.000% |
| $81,250 | 80.0% | 20.0% |
| $100,000 | 65.0% | 35.0% |
| $130,000 | 50.0% | 50.0% |
| $162,500 | 40.0% | 60.0% |
Questions
What is a good loss ratio?
It depends heavily on the line of business and how the insurer prices for expenses and profit; many property and casualty insurers target a loss ratio somewhere in the 50 to 70% range, leaving the rest to cover expenses and margin, but the right target varies by market and product.
Is loss ratio the same as a combined ratio?
No. Loss ratio only covers claims against premiums. Combined ratio adds operating expenses into the calculation as well, so a combined ratio above 100% is a clearer signal of an overall underwriting loss than loss ratio alone.
Is this the same as a win loss ratio in sports?
No, despite the similar name. A win loss ratio compares wins to losses in a game or competition. This calculator covers the insurance meaning: claims paid against premiums earned. For the sports figure, see the win/loss percentage calculator.
Why do insurers care about loss ratio if a lower number is always better?
A loss ratio that is too low for too long can mean premiums are priced higher than the risk actually warrants, which invites regulatory scrutiny in some markets and can lose business to competitors pricing more accurately.
For the unrelated sports meaning of "win loss ratio", see the win/loss percentage calculator. To see claims and premiums restated as margin and markup, see the margin and markup calculator.