Loss Ratio Calculator

How it is calculated

The tool computes loss ratio = claims paid ÷ premiums earned × 100. Both inputs are money amounts for the same period, such as one accounting year, and in the same currency. The answer is a percentage rounded to two decimals, and it also echoes your two amounts back so you can check what was used. Claims paid must be zero or more, and premiums earned must be above zero, because dividing by zero or by a negative premium has no meaning; in those cases no result appears. A result over 100% is allowed and means claims exceeded premiums. The tool uses exactly the claims figure you enter. It does not add reserves for unpaid claims or claim-handling costs, so decide what belongs in the claims figure before you type it.

Common mistakes

• Using written premium instead of earned premium. Only the part of the premium that covers time already elapsed counts as earned.
• Mixing periods, such as a full year of claims against six months of premium, which inflates the ratio.
• Entering a rate or percentage in the claims field instead of an amount in money.
• Reading a ratio below 100% as profit. Expenses sit on top of claims, so a 95% loss ratio can still be unprofitable.
• Adding reserves or expenses to the claims figure without noticing, so the result no longer matches the loss ratio you are comparing it with.