GENERAL KNOWLEDGE

Detailed explanation-1: -The loss ratio, used primarily in the insurance industry, is a ratio of losses paid out to premiums earned, expressed as a percentage.

Detailed explanation-2: -The loss ratio is a mathematical calculation that takes the total claims that have been reported to the carrier, plus the carrier’s costs to administer the claim handling, divided by the total premiums earned (This refers to a portion of policy premium that has been used up during the term of the policy).

Detailed explanation-3: -The loss ratio formula is insurance claims paid plus adjustment expenses divided by total earned premiums. For example, if a company pays $80 in claims for every $160 in collected premiums, the loss ratio would be 50%.

Detailed explanation-4: -Loss Ratio Formula = Losses Incurred in Claims + Adjustment Expenses / Premiums Earned for Period. For example, if an insurer collects $120, 000 in premiums and pays $60, 000 in claims and adjustment expenses. The loss ratio for the insurer will be calculated as $60, 000/$120, 000 = 50%.