Work out loss ratio instantly with clear inputs, formula shown and shareable results.
Loss ratio is incurred losses over earned premium, and adding loss adjustment expenses gives the ratio underwriters actually manage. What remains after the loss and LAE ratio is the margin available for acquisition costs, administration and profit — usually 25-35% at best.
Loss ratio
Loss ratio % = Incurred losses / Earned premium x 100
Loss and LAE ratio
Ratio % = (Incurred losses + Loss adjustment expenses) / Earned premium x 100
Indicative estimate only. Fees, entitlements, limits and formulas vary by jurisdiction, statute, policy wording and the facts of the case. This is not legal, tax, insurance or financial advice — confirm with a qualified professional or the relevant authority.
Earned, so that premium and losses relate to the same exposure period. Written premium distorts the ratio in a growing or shrinking book.
It depends on the expense ratio. A book with a 30% expense ratio needs a loss ratio below 70% to underwrite profitably.