Loss Ratio
The Loss Ratio is the difference between the ratios of premiums paid to an insurance company and the claims settled by the company. The Loss Ratio is the total losses paid by an insurance company in the form of claims. Loss ratios vary depending on the type of insurance. For example, the Loss Ratio for health insurance tends to be higher than the Loss Ratio for property and casualty, such as car insurance. This is an indicator of how well an insurance company is doing. This ratio reflects whether a company is collecting premiums higher than the amount paid in claims or if it is not collecting enough premiums to cover claims. Companies that have high loss claims may be experiencing financial trouble.
Calculated as: Net claims incurred / Net premiums earned X 100