1. What is the Combined Ratio?

The Combined Ratio is a key metric in the insurance industry that measures the profitability of an insurance company by comparing the sum of incurred losses and expenses to earned premiums.

2. How Does the Calculator Work?

The calculator uses the Combined Ratio formula:

Where:

• \( \text{Loss Ratio} \) — Incurred losses divided by earned premiums
• \( \text{Expense Ratio} \) — Underwriting expenses divided by earned premiums

Explanation: A ratio below 100% indicates underwriting profit, while above 100% indicates loss.

3. Importance of Combined Ratio

Details: The Combined Ratio is crucial for assessing an insurer's underwriting performance without considering investment income. It helps evaluate operational efficiency and pricing adequacy.

4. Using the Calculator

Tips: Enter both loss ratio and expense ratio as percentages. The calculator will sum them to give the combined ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Combined Ratio?
A: Generally, below 100% is profitable. The lower the better, with industry averages typically between 90-105%.

Q2: How is this different from Operating Ratio?
A: Operating Ratio includes investment income, while Combined Ratio focuses solely on underwriting performance.

Q3: Can Combined Ratio be negative?
A: No, since both components are positive values, the ratio cannot be negative.

Q4: What affects the Combined Ratio?
A: Claims frequency/severity, underwriting expenses, premium rates, and operational efficiency.

Q5: Why is 100% the break-even point?
A: At 100%, the sum of losses and expenses exactly equals the premiums collected.