Insurance Loss Ratio Calculator
Calculate the loss ratio for any insurance book of business. Enter incurred losses and earned premiums to instantly see whether underwriting results are profitable or loss-making.
How to use this tool
- Enter incurred losses, earned premiums and expense ratio (optional) in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your loss ratio and the full breakdown beneath it.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Loss Ratio = Incurred Losses / Earned Premiums × 100
Combined Ratio = Loss Ratio + Expense Ratio
A combined ratio below 100% indicates an underwriting profit; above 100% indicates an underwriting loss.
How it works
The loss ratio is the primary metric of underwriting performance in property and casualty insurance, representing the proportion of earned premium consumed by claims. It is calculated by dividing total incurred losses (claims paid plus reserves) by earned premiums collected.
When an expense ratio is provided, adding it to the loss ratio yields the combined ratio — the most widely used single indicator of insurance company profitability from operations. A combined ratio under 100% means the insurer earns an underwriting profit before investment income.
Worked example
$750,000 claims on $1,000,000 premium with 28% expenses
- Loss Ratio = $750,000 / $1,000,000 × 100 = 75%
- Combined Ratio = 75% + 28% = 103%
- Underwriting Margin = 100% − 103% = −3%
Loss ratio is 75.00%, combined ratio is 103.00%, indicating an underwriting loss of 3.00%.
Common mistakes to avoid
- Using written premiums instead of earned premiums as the denominator — written premiums include unearned portions of policies still in force; only the earned portion matches the exposure period of the losses.
- Omitting loss adjustment expenses (LAE) from incurred losses when industry comparisons include them — the pure loss ratio and the loss-and-LAE ratio are not interchangeable.
- Treating a combined ratio below 100% as guaranteed profitability without accounting for investment income; some carriers intentionally underwrite at combined ratios above 100% if investment returns are sufficient.
Key terms
- Loss Ratio
- Incurred losses divided by earned premiums, expressed as a percentage; the core measure of claims cost relative to premium income.
- Earned Premiums
- The portion of written premium that has been 'earned' by the insurer because the coverage period has elapsed.
- Incurred Losses
- Total claims costs including amounts paid to policyholders plus any reserve set aside for claims not yet settled.
- Combined Ratio
- The sum of the loss ratio and expense ratio; a figure below 100% signals underwriting profitability.
- Expense Ratio
- The insurer's operating expenses (commissions, administration) expressed as a percentage of earned premiums.
Frequently asked questions
- What is a good loss ratio for property and casualty insurance?
- A loss ratio below 70% is generally considered healthy for P&C lines, though acceptable ranges vary by line. Workers compensation and medical malpractice tend to run higher than homeowners or commercial auto.
- What is the difference between the loss ratio and the combined ratio?
- The combined ratio adds the expense ratio (underwriting expenses as a percentage of earned premiums) to the loss ratio. A combined ratio below 100% signals an underwriting profit before investment income.
- What does a loss ratio above 100% mean?
- It means incurred losses exceeded earned premiums for the period, indicating an underwriting loss. The insurer paid out more in claims than it collected in premiums, regardless of expenses.