Loss Ratio Calculator

Loss ratio is the fundamental metric for measuring insurance profitability. It represents the percentage of premiums paid out in claims, calculated by dividing total claims paid by total premiums earned. Our loss ratio calculator provides instant analysis that helps underwriters, agents, and insurance executives make data-driven decisions.

A loss ratio below 100% means the insurance company is collecting more in premiums than it pays in claims—but that doesn't mean profitability. Operating expenses, including agent commissions, administrative costs, and marketing, typically add 25-35% on top of losses. This is why insurance companies target loss ratios in the 60-70% range for most lines of business.

Insurance agents use loss ratio to evaluate their book of business. A book with consistently high loss ratios will eventually face non-renewal or significant rate increases from carriers. By monitoring loss ratios at the account level, agents can identify problem accounts early and take corrective action—whether that's recommending better risk management practices or transitioning the account to a more appropriate carrier.

For underwriters, loss ratio is central to pricing decisions. If a class of business or territory is running at a 90% loss ratio, rates need to increase or underwriting guidelines need to tighten. Conversely, if loss ratios are below target, there may be room for competitive pricing to win more business. Loss ratio analysis drives the continuous cycle of insurance pricing.

Loss ratio varies significantly by insurance line. Personal auto insurance typically runs 65-75% loss ratios. Workers' compensation can range from 50-80% depending on the state and industry class. Commercial property might run 40-60% in good years but spike during catastrophe years. Understanding these benchmarks helps contextualize your specific results.

It's important to consider loss ratio over time, not just in a single period. Insurance is inherently volatile—one large claim can skew a year's results. Most sophisticated analyses look at loss ratios over 3-5 years to identify true trends versus statistical noise.