Also known as: Claims ratio
The ratio of claims an insurer pays out to the premiums it collects, used to gauge risk and pricing.
Loss ratio is calculated as losses paid (plus adjustment expenses) divided by premiums earned, expressed as a percentage. A loss ratio of 60 percent means the insurer paid 60 cents in claims for every premium dollar. Insurers use it to judge whether a book of business is profitable and to set future pricing. For a business buyer, your own loss ratio (how much your carrier has paid on your claims relative to your premium) influences your renewal premium and how attractive you look to other carriers. A high loss ratio can raise your rates or make coverage harder to place.
Loss ratio is the percentage of premium an insurer pays back out in claims: losses paid divided by premiums earned. A 60 percent loss ratio means 60 cents of every premium dollar went to claims. Insurers use it to measure profitability and set pricing.
If your business has filed claims that are large relative to the premium you pay, your loss ratio is high, and carriers may raise your rate, add restrictions, or decline to renew. A low loss ratio makes you cheaper to insure and easier to place with competing carriers.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.