Loss Ratio Calculator — Insurance Profitability Metric
The loss ratio measures how much of every premium dollar an insurer pays out in claims and claim-handling costs. Enter incurred losses, loss adjustment expenses, earned premium and the expense ratio to get the loss ratio, combined ratio and underwriting profit in seconds.
%
Below 100% — insurer covers losses from premium income
- 1
Total losses + LAE
600,000 + 60,000 = 660,000 - 2
Loss ratio
660,000 ÷ 1,000,000 × 100 = 66Losses and LAE as a percentage of earned premium.
How does this calculator work?
Loss Ratio = (Incurred Losses + LAE) ÷ Earned Premium × 100. Combined Ratio = Loss Ratio + Expense Ratio. Below 100% combined is underwriting profit; above 100% is loss. Typical targets: 60–70% loss ratio for auto, 50–65% for property, depending on the line of business.
Formula
How this is calculated
The loss ratio is the most fundamental measure of underwriting performance in property-casualty insurance. It compares incurred losses (claims paid or reserved) plus loss adjustment expenses (LAE — the cost of investigating and settling claims) to the premium the insurer has earned over the same period. A loss ratio below 100% means claims cost less than premium income; above 100% means the insurer pays out more than it takes in from underwriting alone.
The combined ratio adds the expense ratio (selling, general and administrative costs as a percentage of premium) to the loss ratio. A combined ratio below 100% indicates underwriting profit; above 100% means the insurer relies on investment income to break even or profit. Many insurers run combined ratios above 100% deliberately, because investment returns on the float more than compensate.
Note that loss ratios vary widely by line of business — long-tail liability lines (e.g. workers' compensation) typically run higher than short-tail property lines, partly because reserves are held for years before claims are paid. The figures here are for a single period; multi-year trending and actuarial reserve adequacy are not captured.
Frequently asked questions
It depends on the line of business. For personal auto, 60–70% is typical; property lines often target 50–65%. A loss ratio above 100% means pure underwriting losses. Most insurers aim for a combined ratio (loss + expense) at or below 100%, with the target varying by whether investment income can subsidise underwriting.
The loss ratio only counts claims costs (losses + LAE) as a proportion of earned premium. The combined ratio adds the expense ratio (operating costs) on top. Combined ratio is the broader measure of underwriting profitability: below 100% means profit, above 100% means loss from underwriting.
LAE covers the costs of investigating, evaluating and settling claims — including adjusters' salaries, legal fees, and expert witnesses. It is often split into allocated LAE (costs linked to a specific claim) and unallocated LAE (overhead). Including LAE in the numerator gives a better picture of the true cost of claims.
Also known as
TG we-Calculate Editorial Team. (2026). Loss Ratio Calculator — Insurance Profitability Metric [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/loss-ratio-calculator
TG we-Calculate Editorial Team. "Loss Ratio Calculator — Insurance Profitability Metric." TG we-Calculate. 2026. https://we-calculate.com/calculator/loss-ratio-calculator.
TG we-Calculate Editorial Team, "Loss Ratio Calculator — Insurance Profitability Metric," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/loss-ratio-calculator
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