Loss Ratio

The loss ratio is the single most important profitability gauge in insurance: incurred losses ÷ premiums earned, expressed as a percentage. A 60% loss ratio means the carrier paid $60 in claims for every $100 of premium it earned — before its own expenses (commissions, overhead, taxes). Add a typical ~30-35% expense ratio and you get the combined ratio; above 100% the line is unprofitable on underwriting.

Loss ratios vary enormously by line and by state, which is exactly why rates differ so much. Nationally in 2023, commercial auto ran a ~74% loss ratio with a negative underwriting result, while workers' comp ran closer to 45% — a big reason WC pricing has stayed soft while trucking rates climb. Within a single line, one state can run 30% while another runs over 100% depending on litigation climate, catastrophe exposure, and medical costs.

For a business buyer, the loss ratio is the 'why' behind your renewal: carriers file rate increases where loss ratios run hot. See how it plays out by state in our commercial auto, general liability, and BOP studies. Related but distinct: a loss cost is the per-unit claims cost a rating bureau files, whereas the loss ratio is an after-the-fact result on booked premium.