Calculate the insurance loss ratio (incurred losses ÷ earned premium), with or without LAE, against a target.
How the loss ratio calculator works
The loss ratio is the share of premium consumed by claims. It is the single most important measure of whether an account, program or book is priced correctly.
Formula
Loss ratio = (Paid losses + Reserves) ÷ Earned premium. Loss & LAE ratio adds loss adjustment expense to the numerator.
How to use it
Enter earned premium.
Enter paid losses and outstanding reserves.
Optionally add LAE and a target loss ratio.
Worked example
$480K paid plus $210K reserves on $1.25M earned is a 55.2% loss ratio — $122,500 of headroom to a 65% target.
Frequently asked questions
What is a good loss ratio?
It depends on the line’s expense load. The permissible loss ratio is 1 minus expense and profit ratios; staying below it means the business is adequately priced.
Should I use paid or incurred losses?
Incurred (paid + reserves). Paid losses alone understate losses on immature years.
Combined Ratio Calculator — Calculate the combined ratio — loss & LAE ratio plus expense ratio — with statutory or GAAP basis, underwriting profit and operating ratio.
Loss Run Analyzer — Analyze a multi-year loss run: loss ratio by year, 3- and 5-year loss ratios, frequency and severity.
Loss Development (IBNR) Calculator — Project ultimate losses and IBNR by accident year with age-to-ultimate loss development factors (chain ladder).